Rivian Automotive Inc (NASDAQ:RIVN) is being sued by a shareholder who alleges that the company's surprise 20% price hike violated US securities laws and damaged the company's reputation.
Earlier this month, the electric truck manufacturer sparked a customer backlash by raising the R1S's price to US$84,500 from US$70,000, and the R1T's price to about US$79,500 from US$67,500.
Within a day, the company partially reversed course, allowing customers to keep the pricing that was advertised when they placed their deposit, but the lawsuit alleges that Rivian failed to disclose that it intended to increase its vehicles' base prices by approximately US$12,000 or the potential harm this would cause.
The complaint was filed Monday in the US District Court in San Francisco by shareholder Charles Larry Crews who claimed Rivian disguised the fact that its R1S and R1T pickup trucks were so cheap they had to raise prices after its initial public offer in November.
The new shareholder complaint seeks class-action status for all common stockholders who participated in the IPO, when the stock was priced at US$78 per share.
Shares of Rivian traded for around US$67 per share the day before the price hike was announced but, the lawsuit points out, the company's value has plummeted to around US$42 per share in the days following the price hike.
"Unbeknownst to investors," the suit says, Rivian's filings for the IPO contained statements that were "materially inaccurate, misleading, and/or incomplete."
The lawsuit claims that the unexpected price rises will "tarnish Rivian's reputation as a trustworthy and transparent company" and could lead to the cancellation of a "significant number" of nearly 55,400 preorders that have already been placed, as well as future preorders that are in jeopardy.
Rivian believes it will fill this 55,400 backlog of R1T and R1S EVs by the end of 2023 based on its production forecast.
The company's chief executive RJ Scaringe apologised after the price hike was rescinded, saying, "I have made a lot of mistakes since starting Rivian more than 12 years ago, but this one has been the most painful. I am truly sorry and committed to rebuilding your trust."
The lawsuit asserted that damage had been done regardless of the reversal.
Rivian went public through a traditional IPO, which valued the company at US$80bn and was the world's largest IPO of 2021.
Ford and Amazon own the largest stake at 22% after jointly investing US$10.7bn out of the total US$12bn in new IPO funds.