Rivian Misled Investors By Failing to Disclose Post-IPO Electric Vehicle Price Increases, Class Action Alleges

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Rivian Automotive and a stable of underwriters face a proposed class action that alleges the electric vehicle maker misled investors in the run-up to its November 2021 initial public offering (IPO) by failing to disclose that it would have to raise prices shortly thereafter on more than 55,000 preorders, and might suffer reputational damage as a result. 

The 28-page case relays that as of October 31, 2021, Rivian reported that it had approximately 55,400 U.S. preorders for its R1T electric pickup truck and R1S electric SUV from customers who each paid a cancellable and fully refundable $1,000 deposit. The case says that based on Rivian’s production forecast, the company expected to fill its backlog of preorders by the end of 2023. The lawsuit stresses that Rivian’s potential for success as a company depended ultimately on customers completing their purchases once the defendant’s electric vehicles became available. 

According to the lawsuit, Rivian’s emphasis on its reputation for transparency and devotion to customers, alongside the R1T And R1S vehicles and a large number of preorders, were “key selling points” to IPO investors. The case alleges, however, that the registration statement Rivian filed with the Securities and Exchange Commission was significantly “inaccurate, misleading, and/or incomplete” given the company failed to disclose that the R1T and R1S were underpriced such that the automaker would need to raise prices shortly after its IPO, and that the company was at risk of reputational damage. 

The complaint alleges that these price increases would “tarnish Rivian’s reputation as a trustworthy and transparent company” and place in jeopardy of cancellation a significant number of existing preorders. Overall, the case alleges Rivian’s share price was artificially and materially inflated at the time of its IPO. 

Prior to the IPO, Rivian announced base pricing for its R1T pickup truck and R1S SUV at $69,000 and $72,000, respectively, the suit states. In December 2019, Tesla unveiled its new Cybertruck with a base price of $39,900, which led to some media speculation as to how Rivian would respond as far as adjusting the pricing for the R1T, the case relays. 

According to the complaint, Rivian’s SEC registration statement failed to inform investors that it had underpriced the R1T and R1S, which would necessitate the electric vehicle maker to raise prices shortly after the IPO. The document also failed to disclose the potential for both reputational damage to Rivian and the cancellation of fully refundable preorders, the suit says. 

On March 1, 2022, Rivian announced that it was raising the prices for the R1T and R1S by 17 percent and 20 percent, respectively, the lawsuit says. At the time of this announcement, Rivian had produced and sold roughly 1,000 vehicles while the number of preorders had grown to around 71,000, according to the case. 

“Customers who had placed $1,000 refundable deposits for Rivian’s vehicles configured to their individual preferences were understandably furious,” the suit reads, citing an Electrek article that stated Rivian customers were canceling their preorders at “alarming rates” in the wake of the announcement of price increases. 

Cited in the complaint is an Ars Technica article updated to reflect that Rivian has said it will honor previous prices for customers who placed preorders before March 1, 2022, and that those who canceled preorders before then will be able to reinstate them if they so choose. 

The case contends that although Rivian CEO RJ Scaringe released a statement in which he apologized for breaking customers’ trust in the company, the damage to the vehicle maker’s reputation was already done. According to the suit, investors were injured financially as Rivian’s stock fell in early March.

“Rivian’s stock fell an additional $2.65 per share on March 3, 2022, and continued to fall to $42.43 per share on March 7, 2022, the date of this complaint – down 37% from the February 28, 2022 closing price of $67.56 per share and significantly below Rivian’s IPO price of $78.00 per share,” the suit says. 

The lawsuit looks to cover all persons or entities who bought Rivian common stock pursuant to or traceable to the company’s initial public offering on November 10, 2021. 

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