Rivian settles $250 million stockholder lawsuit

Rivian has agreed to settle a 2023 class action lawsuit for $250 million, maintaining that the company is not admitting fault or wrongdoing.

The plaintiffs, Rivian stockholders, allege that the OEM has violated the federal Securities Act by providing materially inaccurate statements about vehicle production costs.

The suit states that Rivian raised $13.7 billion from investors, noting it was the seventh-largest initial public offering (IPO) in U.S. history, and promised a “feature-packed EVs at retail prices that were highly competitive with the existing and established competition, including Tesla.”

“In the months leading up to the IPO, however, Rivian’s management internally recognized that this premise was flawed, that the company had vastly underestimated the cost of the parts needed to build its vehicles (which alone exceeded the retail prices of those vehicles), and that a material price increase and/or a significant reduction in features was necessary to ensure Rivian’s viability as a business,” the suit states. “They also knew that satisfying Rivian’s pipeline of pre-orders at the prices promised to customers would cause significant financial harm to the fledgling company.

“[B]y the time of the November 2021 IPO, it had become clear within the company that the publicly announced R1 Platform pricing could not support Rivian’s business model, as the cost of the R1 Platform’s bill of materials — i.e., the roughly 3,000 parts required to build each R1 —significantly exceeded Rivian’s publicly disclosed retail prices.”

It is further alleged that Rivian:

• • Provided “untrue statements of material fact and omissions of material fact that rendered the statements… misleading, as well as material omissions in violation of the affirmative disclosure obligations” in its Class A common stock registration statement.
  • Provided an “untrue” representation in the registration statement that “Rivian could ‘generate positive gross profit[s]’ on the R1 Platform simply by increasing ‘production utilization’ and ‘leverag[ing its] investments.’
  • Failed to disclose information regarding material risks pursuant to [SEC Regulation S-K] Item 105. “The disclosures in the registration statement therefore failed to adequately alert investors to the actual risks associated with an investment in Rivian.”
  • Failed to meet SEC Regulation S-K Item 303, which requires an issuer to identify “any known trends or any known demands, commitments, events or uncertainties that will result in or that are reasonably likely to result in the registrant’s liquidity increasing or decreasing in any material way.”

In an Oct. 23 press release, Rivian denied all of the allegations in the suit.

“However, settling will enable Rivian to focus its resources on the launch of its mass market R2 vehicle in the first half of 2026,” the release states. “Under the terms of the settlement, which is subject to approval by the court, Rivian will pay $250M to settle the claims brought on behalf of purchasers of Rivian class A common stock between November 10, 2021, and March 10, 2022.”

The settlement would be paid with directors’ and officers’ liability insurance ($67 million) and cash on hand ($183 million), according to the release.

Also on Oct. 23, news circulated that Rivian plans to lay off 600 employees, or about 4.5% of its workforce.

The Wall Street Journal broke the news, citing an email they viewed that CEO RJ Scaringe sent to his employees.

“These are not changes that were made lightly,” the WSJ quotes Scaringe as saying. “With the changing operating backdrop, we had to rethink how we are scaling our go-to-market functions.”

A CNBC report adds that Scaringe said “the changes will ensure the company ‘can deliver on our potential by scaling efficiently towards building a healthy and profitable business,’ as it prepares to launch its new R2 models, which are expected to begin production next year.”

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Featured image provided by Rivian