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Shares of Rivian (RIVN) stock are in focus after U.S. District Judge Josephine Staton stated that the company is liable to face a lawsuit alleging that it defrauded investors during and after its initial public offering (IPO) relating to the prices of its R1S SUV and R1T pickup truck. The lawsuit adds that Rivian hid the fact that it underpriced its vehicles, which led to a price hike. Swedish pension fund Sjunde AP-Fonden is the leading plaintiff in the proposed class action lawsuit.

Staton stated that shareholders could try to prove that Rivian knew in advance that it would have to raise prices due to surging material losses, which in turn would cut losses for the unprofitable electric vehicle (EV) company. RIVN stock fell by 39% 10 days after Rivian hiked prices on March 1. The price of the R1S increased to $84,500 from $70,000, while the R1T increased to $79,500 from $67,500. Shortly after the announcement, CEO R.J. Scaringe stated that anyone who pre-ordered a vehicle before March 1 would still be eligible for the previous, cheaper price, admitting to customers that “we broke your trust.”

RIVN Stock: Rivian Will Now Face a Shareholder Lawsuit

“The inference that Rivian senior executives knew that the (bill of materials) cost for each R1 EV exceeded its retail price by approximately $40,000 leading up to the IPO is far more plausible than the inference that those executives were in the dark about the issue,” said Staton. Rivian spokesperson Harry Porter declined to comment per a Reuters request.

Still, shareholders seem to be shaking off the news, as RIVN is in the green today. In fact, shares are up by over 50% during the past month on the heels of a positive production and delivery announcement. Rivian announced that it had produced 13,992 vehicles and delivered 12,640 of them during Q2, beating analyst estimates on both fronts. Production was up by 218% year-over-year (YOY), while deliveries were up by 183% YOY. Year-to-date, Rivian has now produced 23,387 vehicles and delivered 20,586 of them. These numbers are in-line with Rivian’s previously announced production guidance of 50,000 vehicles. Shareholders will likely receive more details when Rivian reports its earnings on Aug. 8 after the market close.


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