Rivian Pays $250 Million to Settle IPO Fraud Lawsuit as Company Cuts 600 Jobs

Rivian has agreed to pay $250 million to settle a 2022 class-action lawsuit that accused the electric vehicle maker of misleading investors about vehicle pricing during its blockbuster 2021 initial public offering, according to a court filing Thursday.

The settlement arrives at a critical juncture for the struggling EV startup. On the same day it announced the legal agreement, Rivian confirmed it’s laying off approximately 600 employees—roughly 4.5% of its workforce—as it grapples with collapsing EV demand following the September 30 expiration of federal tax credits and mounting pressure to launch its make-or-break R2 SUV in 2026.

What Shareholders Alleged About Rivian’s IPO Deception

The lawsuit claimed Rivian deliberately concealed a massive pricing problem during and after its November 10, 2021 IPO, which raised $11.9 billion and became the largest public offering of that year. Shareholders alleged the Irvine, California-based company knew its R1S SUV and R1T pickup truck were underpriced relative to manufacturing costs, but failed to disclose this material fact to investors.

That alleged deception came to light on March 1, 2022, when Rivian shocked customers and the market by announcing steep price increases. The R1S price jumped from $70,000 to $84,500—a 20.7% hike. The R1T climbed from $67,500 to $79,500, an 18% increase. The sudden price changes sparked outrage on social media and triggered a brutal selloff. Rivian’s stock plummeted 39% over the following 10 days, wiping out billions in shareholder value.

“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 Thursday. Despite the denial, the $250 million payout represents what plaintiffs’ lawyers described as “a substantial percentage” of the potential damages shareholders could have recovered at trial.

Why Rivian Is Settling Now

The timing of this settlement isn’t coincidental. Rivian faces an existential moment as it prepares to launch the R2, a smaller and more affordable SUV starting at $45,000 that represents the company’s best shot at mass-market viability. Success with the R2 could determine whether Rivian survives or becomes another cautionary tale in the EV industry’s brutal shakeout.

“The settlement will help Rivian focus on that launch,” the company said, signaling that eliminating this legal distraction outweighs the $250 million cost.

But Rivian is hemorrhaging cash at an alarming rate. The company continues to lose money on every vehicle it produces, burning through its reserves while attempting to scale production. Beyond the settlement, Rivian now faces a harsh operating environment. The elimination of the $7,500 federal EV tax credit on September 30 has already triggered a sharp decline in electric vehicle demand nationwide. Tariffs on auto parts imports are squeezing margins further. And production challenges persist at its Normal, Illinois plant as it retools for next-generation vehicles.

Legal Background and Investor Claims

The class-action lawsuit, filed in 2022 in the U.S. District Court for the Central District of California, encompassed shareholders who purchased Rivian stock between November 10, 2021, and March 10, 2022. The plaintiffs argued that Rivian’s IPO offering documents and subsequent statements violated federal securities laws by omitting critical information about the true cost structure of its vehicles.

At the time of the IPO, Rivian had delivered just a handful of vehicles—mostly to its own employees. The company was valued at roughly $76 billion despite minimal revenue and massive losses. That sky-high valuation rested on investor confidence in Rivian’s ability to compete with Tesla and traditional automakers in the electric truck and SUV market.

When the March 2022 price increases were announced, that confidence evaporated. The lawsuit alleged Rivian knew all along that its original pricing was unsustainable but concealed this fact to maximize its IPO valuation and secure billions in capital.

The Layoffs and Survival Strategy

Thursday’s dual announcements—the settlement and workforce reduction—paint a sobering picture of Rivian’s financial position. The 600 job cuts mark the third round of layoffs in just four months, underscoring the company’s desperate need to control costs ahead of the R2 launch.

Rivian reported a 32% increase in vehicle sales to 13,201 units in the third quarter compared to the same period last year, driven by buyers rushing to purchase before the tax credit expired. However, the company simultaneously lowered its full-year delivery guidance to between 41,500 and 43,500 vehicles, down from a previous target of 46,000. This revised forecast represents a potential 16% decline from the 51,579 vehicles delivered in 2024.

The R2, expected to start production in 2026 at Rivian’s Normal facility, will compete directly with more affordable EVs from Tesla, Hyundai, and Ford. The vehicle must succeed to justify Rivian’s massive capital investments and ongoing losses. Analysts estimate automakers typically need around 400,000 annual sales to achieve positive operating income at similar margins—a target that remains distant for Rivian.

EVXL’s Take

Rivian’s $250 million settlement buys the company something it desperately needs right now: breathing room. With the R2 launch looming and the EV market in freefall after losing federal incentives, the last thing Rivian needed was a protracted securities fraud trial consuming management attention and potentially exposing damaging internal documents about those 2022 price increases.

But let’s be clear about what this settlement really means. Despite Rivian’s protestations that it’s not admitting wrongdoing, paying a quarter billion dollars suggests the company and its lawyers looked at the evidence and decided a trial was too risky. The core allegation—that Rivian knew its vehicles were underpriced but concealed this from IPO investors—is difficult to disprove when the price hikes came just four months after going public.

We’ve been covering Rivian’s mounting challenges for months now. Today’s layoff announcement, which we reported earlier, is the third workforce reduction since June. The company is cutting muscle, not just fat. These aren’t restructuring moves—they’re survival measures.

The broader question for EV enthusiasts: Can Rivian make it to the R2 launch in viable shape? The company had $18 billion in cash after its IPO. Today it has less than $6 billion. A $250 million settlement, ongoing losses of over $1 billion per quarter, and collapsing post-tax-credit demand all point to a company racing against its own burn rate.

If the R2 succeeds and Rivian can produce it profitably at scale, this settlement becomes a footnote. If the R2 stumbles, this $250 million will look like money Rivian couldn’t afford to spend. Either way, 2026 is shaping up as the year Rivian either establishes itself as a legitimate Tesla alternative or joins the long list of EV startups that couldn’t make the jump from hype to sustainable business.

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