Judge Allows Suit Alleging Rivian Defrauded Investors To Move Forward

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A federal judge has decided that Rivian is going to have to face a lawsuit that alleges the automaker defrauded shareholders during its initial public offering back in 2021. According to Reuters, it all stems from claims that Rivian concealed the fact it had underpriced its R1T electric pickup and R1S electric SUV, which led to controversial price hikes.

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The Los Angeles judge said Rivian shareholders could try to prove that Rivian – an automaker that is not profitable yet – knew it would end up needing to raise the price point of its vehicles because of higher materials costs to avoid even bigger losses, Reuters reports.

Rivian’s share price reportedly slid nearly 40 percent during a 10-day period following the company’s decision on March 1st, 2022 to raise R1S prices about $15,000 from $70,000. It also jumped R1T prices to $79,500 from $67,500. A few days later the company reportedly backtracked and said customers with existing pre-orders wouldn’t be slapped with the higher prices.

In her decision, Judge Josephine Staton said the higher costs were a “major obstacle to profitability unique to Rivian.”

“The inference that Rivian senior executives knew that the (bill of materials) cost for each R1 EV exceeded its retail price by approximately $40,000 leading up to the IPO is far more plausible than the inference that those executives were in the dark about the issue,” Staton said, according to Reuters.

On November 10th, 2021, Rivian went public at $78 per share, and the lawsuit will cover shareholders from that date to March 10th, 2022. Reuters reports that it raised about $12 billion in that year’s largest IPO. At the time of publication, Rivian is trading at about $20.65 on the Nasdaq.