What happened

Rivian Automotive (RIVN 1.73%) stock plunged this week and was trading 26% lower through 10 a.m. ET Friday, according to data provided by S&P Global Market Intelligence.

While Rivian's revenue forecast for its third quarter is in line with the estimates, investors are miffed at the money-losing electric vehicle (EV) maker's plans to take on billions of dollars' worth of debt.

So what

In a regulatory filing dated Oct. 4, Rivian announced plans to raise capital by taking on $1.5 billion in debt in the form of senior convertible notes. While investors are always wary of a loss-making company acquiring large amounts of debt, senior convertible notes can also dilute existing shareholders' wealth. That's because these notes are a type of convertible bond that can be converted into equity, meaning their holders can opt to exchange the notes for Rivian shares.

Rivian also released preliminary numbers for the third quarter. The company expects to report revenue between $1.29 billion and $1.33 billion for the quarter, driven by higher deliveries.

Rivian produced 16,304 and delivered 15,564 EVs in the third quarter. For perspective, it produced and delivered only 7,363 and 6,584 EVs, respectively, and generated revenue of $536 million in the third quarter of 2022.

Rivian expects to have $9.1 billion in cash and cash equivalents as of Sept. 30, representing a 10% sequential drop. The company, however, stated that this cash balance should be enough to fund its operations and capital expenditures through 2025.

Now what

Rivian still expects to produce 52,000 EVs this year, so I don't see any surprises there when the company releases its third-quarter earnings report on Nov. 7. Investors, however, are concerned about Rivian's rapid cash burn.

One number that could help Rivian stock rebound after earnings, though, is gross margin. Rivian foresees steady growth in its margins as it ramps up production of its R1T electric pickup trucks and R1S SUV EV, as well as its in-house Enduro drive units and battery packs, which should help it cut down costs.