Rivian Hit With Shareholder Lawsuit Alleging Misleading Statements About Demand

Electric vehicle manufacturer Rivian has a tough road ahead, not only is it losing money, but now it’s also been hit with a lawsuit alleging the company misled investors about its financial health and vehicle demand.

The lawsuit, filed by shareholder Glenn Dietel, accuses Rivian, its CEO, and CFO of making false and misleading statements between March 2023 and February 2024. These statements allegedly painted a rosier picture of Rivian's future, failing to disclose crucial information about declining demand and financial troubles.

Undisclosed losses and dwindling demand

Dietel's lawsuit alleges that Rivian overstated demand for its vehicles and its ability to weather economic challenges. He claims the company withheld information about dwindling demand, leading to significant losses for investors.

Dietel points to Rivian's February announcements revealing lower-than-expected vehicle production goals, financial losses, and staff layoffs. Following these announcements, Rivian's stock price plummeted by $3.94 per share, or 25.6 percent, to close at $11.45 per share. 

“As a result of Defendants’ wrongful acts and omissions, and the precipitous decline in the market value of the Company’s securities, Plaintiff and other Class members have suffered significant losses and damages,” Dietel argues.

EV market slowdown adds pressure

Rivian’s issues are shared with other EV makers, as sales in the market seem to be cooling off. Even EV giant Tesla has been making headlines for its losses and price cuts recently. As the New York Times puts it, more and more EV makers are competing for a slice of a shrinking pie - and it's the newcomers like Rivian and Fisker that seem to be most at risk.

Money reports how electric vehicle sales have been disappointing for automakers so far in 2024, many of whom were betting on a faster pace of adoption. In response, some manufacturers are cutting prices and offering large incentives, but for companies solely focuses on EVs like Rivian, making those cuts can be hard when there are no secondary products to boost margins.  

Rivian maintains optimism despite lawsuit

Despite the lawsuit and market headwinds, Rivian remains outwardly optimistic. The company claims relocating R2 vehicle production to its Illinois facility reduces capital expenditure and maintains a positive outlook. However, some analysts consider Rivian's projected production capacity of 215,000 vehicles a year overly ambitious given current market trends.

The Verge emphasizes Rivian's precarious position as a young company with high operational expenses and limited revenue generation.

Shareholder concerns mount across the EV industry

Dietel's lawsuit against Rivian reflects broader investor anxieties within the electric vehicle industry. Ford faces similar pressure from shareholders concerned about mounting losses in the EV market. Additionally, Lucid Motors' stock price dropped significantly after announcing limited cash reserves for the next year.

Dietel seeks damages, fees, and interest on behalf of all Rivian shareholders nationwide.

The shareholders and the proposed class are represented by Jennifer Pafiti of Pomerantz LLP and Peretz Bronstein of Bronstein, Gewirtz & Grossman, LLC.

The Rivian SEC proposed class action lawsuit is Dietel v Rivian Automotive, Inc. et al, Case No. 2:24-cv-03269 in the U.S. District Court for the Central District of California.