Rivian Settles $250M Lawsuit to Focus on New R2 EV
▼ Summary
– Rivian settled a lawsuit with investors for $250 million while denying allegations of making untrue statements during its IPO.
– The lawsuit claimed Rivian knew its actual production costs exceeded the advertised prices of $67,500 for the R1T and $70,000 for the R1S.
– Investors alleged that a price increase would damage Rivian’s reputation and risk canceling nearly 56,000 pre-orders.
– In early 2022, Rivian raised prices to $79,500 for the R1T and $84,500 for the R1S, sparking customer backlash.
– The company honored original prices for existing preorders, but the lawsuit stated this erased over a third of its value in days.
Electric vehicle manufacturer Rivian has reached a significant legal settlement, agreeing to pay $250 million to resolve a lawsuit brought by investors. The company maintains its position that it did not make misleading statements during its initial public offering but has chosen to settle to eliminate distractions. This strategic move allows Rivian to concentrate its full attention and resources on the development and launch of its upcoming, more affordable R2 electric vehicle, which is scheduled to debut next year.
The legal dispute originated from a shareholder lawsuit filed in 2022. The core allegation was that Rivian was aware its production costs for the R1T electric truck and R1S electric SUV were substantially higher than the advertised prices of $67,500 and $70,000, respectively. The lawsuit argued that the company’s failure to disclose this information was misleading. It further contended that a sudden, large price increase would severely damage the young automaker’s credibility and likely cause a wave of cancellations from its nearly 56,000 pre-order customers.
These concerns materialized just a few months after Rivian’s high-profile IPO in November 2021. The company announced a substantial price jump, setting the new cost for the R1T at $79,500 and the R1S at $84,500. Following a strong negative reaction from its customer base, Rivian reversed course for existing reservation holders, agreeing to honor the original pricing. However, the lawsuit claimed the reputational and financial harm was already done. The controversy allegedly wiped out more than a third of the company’s market value in a matter of days, highlighting the severe impact of the pricing strategy on investor confidence.
(Source: Ars Technica)
