$RIVN's Key Buy Levels After 20%+ Intraday DeclineNEWS
Rivian Automotive Inc's made the decision to issue $1.5 billion worth of convertible green bonds.Here's a breakdown of what's happening:
Share Price Drop: Rivian's stock price plummeted by over 20% on the day of the announcement. It's the most significant daily percentage decline for the company's shares since May of the previous year.
Convertible Green Bonds: The company announced its intention to issue $1.5 billion in convertible green bonds. Convertible bonds are debt securities that can be converted into a company's stock under specific conditions. Being labeled as "green" means the funds raised from these bonds are earmarked for environmentally friendly or climate-focused projects.
Purpose of the Bonds: Rivian intends to use the proceeds from the bond sale to support the launch of its R2 sports utility vehicle in Georgia. By doing so, they aim to "de-risk" this vehicle's launch, implying they're using the funds to mitigate potential financial challenges or uncertainties associated with this launch.
Not the First Time: This isn't Rivian's first foray into green bonds. The company issued a $1.3 billion convertible green bond in March of the same year to support another vehicle family launch.
Market Reaction and Analysis: Elliot Johnson from Evolve ETFs commented that the decision to raise funds came earlier than what the market expected. While Rivian's earnings matched expectations, and they are on course with vehicle shipments, the early fundraising and potential dilution of shares from the convertible bonds might concern investors. Rivian, still seen by some as a speculative business, is raising capital ahead of anticipated timelines, which could be perceived as a sign of cash flow challenges or other unexpected expenses.
Rivian's Performance and Cash Position: Rivian, competing in the electric vehicle market against giants like Tesla, has been investing heavily to boost production. Despite these investments, they have posted positive production and delivery numbers. They've forecasted substantial revenue growth and, as of the end of September, held $9.1 billion in cash reserves, albeit down from $10.2 billion a few months earlier. The CEO had previously indicated that the company's available funds were sufficient to sustain operations till 2025 while controlling costs.
TECHNICAL ANALYSIS
The news went public when RIVN was sitting at the white resistance line, and RIVN has already suffered a 20%+ decline today. I believe that the bleeding has just started, and there are two key price levels where RIVN could potentially bottom out over the next few weeks. The first is the orange support level, and the second is the yellow support zone. I believe that RIVN will have a strong rebound once this bottoms out, and will continue to give updates when a buy opportunity is presented. There is a Ichimoku cloud of resistance that is suppressing RIVN's price at current price levels, the RSI has a lot of room to drop, and this bearish news has caused RIVN to lose support at the midrange of the Bollinger Band. The EMA ribbon is also acting as a zone of resistance that is suppressing RIVN's price.
