After settling on a similar case in late October, Rivian is facing another lawsuit by a shareholder who alleges the company misled investors at the time of its initial public offering.
Fewee Bondad filed a lawsuit in the U.S. District Court for the Central District of California, demanding a jury trial and naming Rivian‘s founder and CEO RJ Scaringe, CFO Claire McDonough, and several members of the Board as defendants.
The list includes Rose Marcario, who announced last week that she has resigned from the Board of Directors after four years.
According to Bondad’s attorney, Rivian failed to disclose risks associated with price hikes on its products in its registration statement with the US Securities and Exchange Commission (SEC).
The lawsuit says that “Rivian‘s ability to raise equity capital or debt on favorable terms in the future is now impaired.”
What the Shareholder Alleges
“Prior to going public in November 2021, Rivian‘s leadership knew that the actual cost of producing the R1 Platform significantly exceeded the publicly announced retail prices, making profitability unattainable without substantial price increases,” the suit states.
Despite that, in November 2021 “Rivian completed one of the largest initial public offerings in US history, selling 153 million shares at $78 per share and raising over $13 billion from investors at an implied valuation exceeding $65 billion.”
According to Bondad, “the Company’s offering documents filed with the SEC portrayed Rivian‘s products and financial prospects in optimistic terms, emphasizing demand, innovation, and scalability, while omitting the material fact that the vehicles’ bill-of- materials (“BOM”) costs rendered the announced pricing unsustainable.”
However, “instead of disclosing this problem, the Company described potential future price adjustments merely as a “risk,” implying that such changes were hypothetical rather than inevitable.”
Prior to its IPO, Rivian announced a base pricing of $69,000 for its R1T pick-up and $72,000 for the R1S SUV.
Four months later — in March 2022 — the company “abruptly announced price increases of approximately 17% for the R1T and 20% for the R1S, applying the hikes even to pre-existing orders.”
By then, Rivian attributed the increases to inflation and the fact that prices were originally set in 2018, a four-year difference from the current reality.
“The disclosure sparked consumer outrage and widespread cancellations, forcing Rivian two days later to reverse course and to honor original prices for early pre-order customers,” the lawsuit notes, adding that it led to “an enormous financial cost.”
Price Hike Impact
A few days later, the company reported it would face negative gross margins for the remainder of 2022, while working to minimize price increases to customers in the near-term.
As “Rivian subsequently reported negative gross profits and billions of dollars in projected losses, the Company’s stock price plummeted,” the lawsuit added.
The EV maker debuted on the Nasdaq at $100 per share and reached its all-time high of $179.47 on November 16, 2021.
Over the following months, the stock fell sharply. By February 16, 2022 — three months after its peak — it had dropped to $66.25, and one month later it was trading at $41.58.
The decline continued through 2022, with shares closing at $18.43 on the last trading day of the year. Since then, Rivian‘s stock has consistently been below $30.
In the past six months, however, the stock has rebounded, doubling from around $11 to over $22.
During Monday’s session, it hit a new yearly high of $22.69 before pulling back to close 3% lower at $21.75.
October Case
In late October, Rivian agreed to settle a similar securities class action lawsuit filed in 2022.
The plaintiffs claimed that its IPO offering documents and subsequent statements to investors — including remarks made during an earnings call and filings with the SEC on December 16, 2021 — contained materially false and misleading statements.
The claims were brought on behalf of purchasers of Rivian‘s Class A common stock between Nov. 10, 2021, and Mar. 10, 2022.
The company denied the allegations in the suit and maintained that “this agreement to settle is not an admission of fault or wrongdoing.”
The decision to settle will allow it to focus its resources on the launch of its mass-market R2 vehicle, which is expected in the first half of 2026.
Under the proposed terms, Rivian will pay the $250 million through a combination of $67 million from directors’ and officers’ liability insurance and $183 million in cash on hand.
