Rivian agrees to pay $250M to settle class-action lawsuit over allegedly misleading investors
Rivian Automotive said in an SEC filing on Friday that it has agreed to pay $250 million to settle a class action lawsuit related to its 2021 IPO.
The lawsuit, filed in the U.S. District Court for the Central District of California, alleged that Rivian had included misleading statements in regulatory filings associated with its public listing about how much it would cost to build its R1 EVs.
The company said that it plans to pay the settlement through $67 million from its directors' and officers' liability insurance and $183 million from its cash reserves. Rivian had $4.8 billion in cash (and cash equivalents) on hand as of June 30.
The settlement still has to be approved by a judge in the Central District court.
“The company denies the allegations in the suit and maintains that this agreement to settle is not an admission of fault or wrongdoing,” Rivian said in a statement. “However, settling will enable Rivian to focus its resources on the launch of its mass market R2 vehicle in the first half of 2026.”
After delivering its first R1 SUVs in late 2021, customers grew outraged when Rivian decided to hike the price of the vehicles in March 2022. The base model of its R1T was raised from $67,500 to nearly $79,000, while the R1S base model was increased from $70,000 to $84,000.
The company stipulated that even the customers who had preordered the vehicles under the previous price would be charged the difference if they weren’t in the final stages of paying for the vehicle and having it delivered.
The backlash caused Rivian CEO RJ Scaringe to release an open letter addressing the controversy and walking back the decision to make people who preordered the vehicles pay the difference of the higher costs.
Scaringe blamed the price hike on the fact that the “costs of the components and materials that go into building our vehicles have risen considerably” since the company originally priced the vehicles.
“As we worked to update pricing to reflect these cost increases, we wrongly decided to make these changes apply to all future deliveries, including pre-existing configured preorders,” he said.
Scaringe added that “we broke your trust in Rivian.”
But Rivian shareholder Charles Larry Crews sued the company anyway, alleging that the company had failed “to disclose material facts and risks arising from, among other things, the alleged fact that the bill of materials cost of Rivian’s R1S and R1T electric vehicles far exceeded the sales price at which these vehicles were being offered to customers requiring Rivian to increase R1 retail prices.”
Rivian is preparing to release its new mid-size R2 SUV in 2026 at a starting price of $45,000, considerably lower than its R1.
Needham analyst Chris Pierce said in August that this lower price point “will be substantially expanding RIVN's TAM (total addressable market) beyond the more expensive R1 vehicle.”