Lawsuit against Rivian alleging shareholder fraud moves forward

Rivian is facing a potential legal setback as a judge has decided the automaker must face a lawsuit accusing the company of defrauding shareholders during and after its highly anticipated initial public offering (IPO) in 2021. U.S. District Judge Josephine Staton ruled on Thursday that the lawsuit against Rivian will proceed, allowing shareholders to present evidence supporting their claims of deceptive practices.

The lawsuit alleges that Rivian concealed vital information from investors regarding the underpricing of its electric vehicles (EVs), ultimately leading to unpopular price hikes. On March 1, 2022, the company raised the prices of its R1S and R1T models, some as much as 20%, triggering anger from customers. Only two days later, Rivian revered course and cancelled the price hikes, assuring pre-order customers that they would not be affected.

According to Judge Staton’s decision, shareholders will have the opportunity to prove that Rivian, facing escalating materials costs, knowingly suppressed the fact that it would need to increase prices on its R1S SUV and R1T pickup truck models to mitigate substantial losses. She further stated that it is more plausible to infer that Rivian’s senior executives were aware of the discrepancy between the bill of materials cost and the retail price in the period leading up to the IPO.

“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 in her ruling. (via Reuters)

Judge Staton’s decision also declines to dismiss claims against the IPO’s lead underwriters, Goldman Sachs, JPMorgan Chase, and Morgan Stanley. Rivian’s IPO, backed by Amazon, raised around $12 billion at $78.00 per share.

The lawsuit covers shareholders from the IPO date until March 10, 2022. The case is Crews v. Rivian Automotive Inc et al, and is being heard in the U.S. District Court for the Central District of California.

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