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Rivian, an electric vehicle maker, is sued (PDF) by a shareholder who alleges that the company’s unexpected 20 percent price increase tarnished Rivian’s reputation and violated U.S. securities laws.
During the IPO, the company made “false claims” about the prices of the R1T truck and R1S SUV, the lawsuit says. “Investors were unaware,” the lawsuit states, “Rivian’s IPO documents contained statements that were “materially inaccurate, misleading and/or incomplete because they did not disclose, among other things, that R1T and R1S were understated to such an extent.” . that Rivian will have to raise prices shortly after the IPO.”
The lawsuit alleges that the unexpected price increase “tarnishes Rivian’s reputation as a reliable and transparent company” and could result in the cancellation of “a significant number” of the nearly 56,000 pre-orders the company has amassed.
Rivian CEO RJ Scaringe, as well as its chief financial officer, chief accountant and board of directors, are named in the lawsuit, along with Rivian’s IPO underwriters, including Morgan Stanley, Goldman Sachs and JPMorgan Chase.
When Ars contacted a Rivian representative, he declined to comment.
Rivian trucks have been widely acclaimed in the automotive press and according to the company, nearly 56,000 customers have paid a fully refundable $1,000 deposit to buy an R1T or R1S. For an up-and-coming automaker, such rave reviews and booking numbers are the key to establishing a presence in this notoriously challenging industry.
Last week, many of those customers were outraged when Rivian significantly increased the prices of both the R1T and R1S. To get a truck with the same specs, customers were now being asked to spend another $12,000 on the R1T and another $14,500 on the R1S. These prices represent increases of 17 percent and 20 percent, respectively. When it was announced, the price increase applied to almost every pre-order – the exemption from it only extended to customers whose cars were in production or close to it. Production ramped up slowly, so it’s likely that few customers are a thing of the past.
During the day, the company partially reversed course, allowing customers to keep the original price that was announced when they made a $1,000 deposit. Customers who canceled pre-orders placed prior to March 1 could restore them if they wished.
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Despite the cancellation, the lawsuit alleges, damage has been done. These are statements made by Rivian in its registration statement and prospectus, two key securities documents that are designed to help investors evaluate the company’s initial public offering. Specifically, as part of these filings, SEC rules required Rivian to “describe any known trends or uncertainties that have or that the registrant reasonably expects will have a material favorable or adverse effect on net sales, earnings, or proceeds from continuing operations.”
In its press statements during the price increase, Rivian said that “inflationary pressure” was to blame for the price increase. However, a shareholder complaint citing Ars Technica’s coverage of Rivian’s price increase points to another lawsuit filed by Laura Schwab, the company’s former vice president of sales and marketing.
One of Schwab’s claims was that Rivian’s management “was clear that the cars were underpriced and every sale resulted in a loss for the company.” After Schwab repeatedly raised the issue, a senior executive “agreed that they would need to raise car prices after the IPO.”
The new shareholder complaint seeks class action status on behalf of all common stock shareholders who participated in Rivian’s IPO on November 10, 2021, when the shares were offered at $78 per share. The day before the price hike was announced, Rivian’s stock was trading at about $67 a share. But within days of the price increase, the company’s value fell to about $42 a share, the lawsuit notes.