A shareholder is suing Rivian Automotive Inc., RIVN -0.52%, alleging the electric vehicle startup misled investors by failing to say it was underpricing its vehicles and should have raised prices after going public.
The lawsuit, filed Monday in California District Court, was filed by shareholder Charles Crews, who, according to the complaint, purchased 35 shares of Rivian RIVN -0.52% on its first day of public trading in November for about $112.83 a share. The lawsuit is pursuing class action status.
A spokesman for Rivian declined to comment on the lawsuit. Rivian shares fell less than 1% to $42.21.
Rivian’s shares tumbled last week after the company said in a letter to customers that it was raising prices of its first two models – an electric pickup truck and an SUV – due to inflationary pressures.
The price increase, which for some customers ranged from US$10,000 to US$20,000 on pre-ordered models, sparked a backlash, with many buyers expressing outrage on social media and threatening to cancel orders.
“Creating anything complex will be filled with errors. We made mistakes. We’re going to do better,” Rivian CEO R.J. Scaringe said Tuesday.
Photo: Mike Blake/Reuters
Two days later, Rivian chief executive R.J. Scaringe apologized for the price hike, saying the company would stick to the original pre-order prices. He said that while the increase was logical, it was wrong and that Rivian had damaged consumer confidence in the company.
Speaking Tuesday at the annual CERAWeek by S&P Global energy conference in Houston, Mr. Scaringe said the startup has learned from the experience.
“Creating anything complex will be filled with errors,” he said. “We made mistakes. We’re going to do better.”
He added that the rising cost of raw materials used in batteries is a major concern for the industry as car companies produce more electric vehicles. Nickel prices have risen sharply in recent days as the war in Ukraine raises concerns about Russian exports of goods.
Rivian’s shares are down nearly 60% since the start of the year, a drop that contrasts with the enthusiasm generated by the November IPO. The company’s stock rose sharply shortly after its public debut, sending its valuation one point higher than that of Ford Motor Co. and General Motors Co.
The complaint alleges that Rivian, which set pre-order prices for two models – the R1T and R1S – prior to their initial public offering, omitted material information from its pre-listing securities filings. This includes not disclosing potential reputational damage and cancellations as a result of having to raise car prices later, the lawsuit says.
The lawsuit also includes underwriting banks involved in Rivian’s IPO, including leading companies Morgan Stanley, Goldman Sachs Group Inc. and JPMorgan Chase & Co.
JPMorgan and Goldman Sachs declined to comment. Morgan Stanley did not immediately comment.
Electric truck maker Rivian has requested an estimate of its public offering in the tens of billions of dollars. But what makes this proposal different from other electric vehicle startups? Explains George Downes of the WSJ. Illustration: George Downes (video from 09/13/21)
— Nora Eckert contributed to this article.
Write to Christina Rogers at [email protected]
Copyright © 2022 Dow Jones & Company, Inc. All rights reserved. 87990cbe856818d5eddac44c7b1cdeb8