Rivian Automotive Inc has been sued by a shareholder who claimed the startup failed to tell investors it had underpriced its electric vehicles, leading to unpopular price hikes that it swiftly rolled back.
In a complaint filed on Monday in U.S. District Court in San Francisco, shareholder Charles Larry Crews said Rivian concealed how its R1S SUV and R1T pickup truck were so underpriced that it needed to raise prices soon after its November initial public offering.
Crews said the increases “would tarnish Rivian’s reputation as a trustworthy and transparent company,” and risk cancellation of a large number of 55,400 preorders dating back to 2018.
He called the rollback, including an apology from Chief Executive R.J. Scaringe, a “futile attempt at damage control.”
Rivian did not immediately respond on Tuesday to requests for comment.
The proposed class action came after Irvine, California-based Rivian sparked a customer backlash, including on social media, on March 1 by raising the R1S’s price to $84,500 from $70,000, and the R1T’s price to about $79,500 from $67,500.
Rivian backtracked two days later, saying customers with existing preorders would not face the higher prices, and customers who had canceled orders could reinstate them.
“It was wrong and we broke your trust in Rivian,” Scaringe wrote customers in a March 3 letter. Rivian cited inflation pressures for the price increases.
The Amazon.com-backed company went public at $78.00 per share on Nov. 10, raising about $12 billion in the world’s largest IPO of 2021.
Its shares closed Monday at $42.43, after losing 37% of their value in the prior five trading days.
Crews said he bought 35 Rivian shares on its first day of trading at $112.83 each, 45% above the IPO price.
In an email, his lawyer Jacob Walker said federal securities laws provide “a very strong remedy” for investors when companies omit key facts from IPO materials.
The lawsuit names more than 30 defendants including Scaringe and lead IPO underwriters Goldman Sachs, JPMorgan Chase and Morgan Stanley.
The case is Crews v Rivian Automotive Inc et al, U.S. District Court, Northern District of California, No. 22-01433.