A group of shareholders will have their day in court, as they attempt to prove that Rivian defrauded them during its initial public offering. A California judge has decided that it is plausible that the automaker’s executives knew that a price hike would be necessary before listing its shares.
The suit dates back to early 2022, when Charles Larry Crews claimed that Rivian concealed the fact that the R1T pickup and the R1S SUV were underpriced in the lead up to its 2021 initial public offering. The automaker’s IPO broke records, launching at $78.00 and rising quickly, but fell by nearly 40 percent after the company decided to raise prices steeply just a few months later.
Rivian drew harsh criticism after hiking prices for its electric vehicles by as much as $14,500, or around 20 percent. The greatest anger was directed at Rivian’s decision to increase the prices of vehicles that customers had already pre-ordered.
More: Shareholder Sues Rivian Claiming It Misled Investors About Vehicle Prices In IPO
Although that particular decision was later walked back, Crews claimed that the company knew that the prices increases “would tarnish Rivian’s reputation as a trustworthy and transparent company,” and described the reversal of course as a “futile attempt at damage control.”
Earlier this month, U.S. District Judge Josephine Staton said that shareholders should have a chance to attempt to prove that Rivian knew it would have to raise prices on the R1S and R1T, per Reuters. She called the increasing material costs a “major obstacle to profitability unique to Rivian,” not just a “garden-variety” problem.
“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,” said Judge Staton.
Lawyers for Swedish pension fund Sjunde AP-Fonden, the lead plaintiff in the proposed class action, will handle the case.
