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IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
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`IN RE RIVIAN AUTOMOTIVE, INC.
`STOCKHOLDER LITIGATION
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`CONSOLIDATED
`C.A. No. 2024-0127-MTZ
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`PUBLIC VERSION
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`VERIFIED CONSOLIDATED STOCKHOLDER DERIVATIVE
`COMPLAINT
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`Plaintiffs Kathleen Miller, Evaristo Sarabia, and Roman Larenov
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`(“Plaintiffs”), by and through their undersigned attorneys, bring this derivative
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`complaint for the benefit of Nominal Defendant Rivian Automotive, Inc. (“Rivian”
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`or the “Company”), against certain members of its Board of Directors (the
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`“Board”) and certain of its executive officers, seeking to remedy the Defendants’
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`breaches of fiduciary duties, as well as other claims specified below. Plaintiffs’
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`allegations are based on personal knowledge as to themselves and their own acts,
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`and upon information and belief as to all other matters, developed from the
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`investigation and analysis by Plaintiffs’ counsel, including a review of filings by
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`Rivian with the U.S. Securities and Exchange Commission (“SEC”), press
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`releases, news reports, analyst reports, investor conference transcripts, publicly
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`available filings in lawsuits, matters of public record, and internal Rivian
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`documents obtained pursuant to inspection demands served by Plaintiffs under 8
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`Del. C. § 220 (“Section 220”).
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`1
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`PUBLIC VERSION
`Dated: August 26, 2024
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`EFiled: Aug 26 2024 06:10PM EDT
`Transaction ID 74155716
`Case No. 2024-0127-MTZ
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`NATURE AND SUMMARY OF THE ACTION
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`1.
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`Rivian designs, develops, and manufactures electric vehicles (“EVs”)
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`and accessories and sells them directly to consumers. Rivian also offers a suite of
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`post-sale services, including maintenance, insurance, and charging, among other
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`things. The Company’s EV pickup truck and EV SUV, branded as the R1T and
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`R1S, respectively, were initially designed as quad-motor vehicles with battery
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`ranges between 230 and 400 miles, depending on the battery pack.
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`2.
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`Ahead of the Company’s November 2021 initial public offering
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`(“IPO”), the base model of the R1T was priced at $67,500 and the R1S at $70,000.
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`The primary rationale of the Company’s $13 billion IPO valuation was that it could
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`deliver high-end electric vehicles at these publicly disclosed prices, which were
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`designed to be competitive with Tesla’s Cybertruck, priced at $69,900, after
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`certain tax credits. Since 2018, Rivian accepted pre-orders for its vehicles secured
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`by a $1,000 deposit. According to the Registration Statement for the IPO, the
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`Company secured approximately 55,400 vehicle pre-orders as of October 31, 2021.
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`3.
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`However, as shown by Section 220 materials produced to Plaintiffs,
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`the Individual Defendants (defined below)
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`, the Individual Defendants
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`6.
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`However, after the IPO, Rivian management was specifically asked
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`by analysts whether the Company was evaluating pricing changes. On December
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`16, 2021, Defendant Robert J. Scaringe, Rivian’s founder and Chief Executive
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`Officer (“CEO”), responded that the EVs “are very aggressively priced,” which
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`misleadingly suggested that pricing changes were not imminent.
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`7.
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`The next day, the Company filed a Form 10-Q with the SEC, which
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`had been reviewed by the Audit Committee, mischaracterizing that future price
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`increases were merely “risks,” as opposed to truthfully disclosing them as a known
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`fact that was going to occur.
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`8.
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`Then, on March 1, 2022, Rivian informed customers with pre-orders
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`that the price of base models of the R1T and R1S would be increased by 17% and
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`20%, respectively. This new pricing would be applied to all existing pre-orders
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`(except for those vehicles that were close to delivery), as well as future orders.
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`9.
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`The price increases sparked customer outrage and many customers
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`cancelled their pre-orders, opting instead to forfeit their $1,000 deposits rather than
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`pay an additional $12,000 to $14,000 for the vehicles.
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`10. To justify this shocking announcement, Rivian’s Chief Growth
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`Officer, Jiten Behl, tried to blame “inflationary pressure, increasing component
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`costs, and unprecedented supply chain shortages and delays for parts.” But in truth,
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`as discussed herein, Rivian had planned to raise prices all along because it simply
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`could not achieve profitability otherwise.
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`11.
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`In response to this backlash, Rivian reversed course and decided not
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`to implement the price increases on pre-orders placed before March 1, 2022,
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`effectively guaranteeing tens of thousands of customers an unsustainably low price
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`that the Company all along had planned to increase. This failure to sell the pre-
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`ordered vehicles at increased prices, which were necessary to achieve profitability,
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`harmed Rivian by hundreds of millions of dollars. One analyst estimated that “[t]he
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`roll-back on pricing is costing [Rivian] ~$850mm in revenue (assuming no
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`cancellations).”
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`12. These revelations precipitated the filing of a securities class action in
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`the U.S. District Court for the Central District of California against Rivian and the
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`Individual Defendants named herein, captioned Charles Larry Crews, Jr. v. Rivian
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`Automotive, Inc., et al., Case No. 2:22-cv-01524-JLS-E (the “Securities Action”),
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`alleging violations of the federal securities laws. The Securities Action has since
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`survived a motion to dismiss by defendants named therein, discussed in more detail
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`below.
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`13. The misconduct of the Individual Defendants has severely damaged
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`shareholder value. In this action, Plaintiffs seek to recover damages to the
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`Company resulting from the misconduct of its fiduciaries.
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`14. Plaintiffs did not make litigation demands on the Board prior to filing
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`this action because doing so would have been futile. As detailed herein, seven of
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`the eight directors serving at the time this action was initially filed
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` These directors
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`15. Nevertheless, these seven directors
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` The outcry when tens of
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`thousands of pre-order customers learned that Rivian planned to raise prices on
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`existing pre-orders was so severe that the Company was forced to honor the
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`original prices,
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`at a cost of hundreds of millions
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`of dollars. For these reasons and those below, demand is excused.
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`JURISDICTION AND VENUE
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`16. Nominal Defendant Rivian is a Delaware corporation governed by the
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`laws of the State of Delaware. This Court has jurisdiction over Rivian under 10
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`Del. C. § 3111.
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`17. This Court has jurisdiction over the Individual Defendants as the
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`current and former directors and officers of a Delaware corporation under 10 Del.
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`C. § 3114 and/or 10 Del. C. § 3104.
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`PARTIES
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`Plaintiffs
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`18. Plaintiff Kathleen Miller has owned Rivian common stock
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`continuously since November 11, 2021.
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`19. Plaintiff Evaristo Sarabia has owned Rivian common stock
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`continuously since November 10, 2021, the date of the IPO.
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`20. Plaintiff Roman Lavrenov has owned Rivian common stock
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`continuously since November 17, 2021.
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`Nominal Defendant
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`21. Nominal Defendant Rivian is a Delaware corporation with its
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`principal executive offices located at 14600 Myford Road, Irvine, CA 92606. The
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`Company’s common stock trades on the Nasdaq stock exchange under the symbol
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`“RIVN.”
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`Individual Defendants
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`22. Defendant Robert J. Scaringe (“Scaringe”) founded Rivian in June
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`2009 and has since served as the Company’s CEO and as a director. Scaringe was
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`designated as Chairman of the Board in March 2018. Scaringe signed the
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`Registration Statement for the IPO. For fiscal years 2021 and 2022, Scaringe
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`received $422,140,679 and $1,014,785 in total compensation, respectively.
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`Scaringe is named as a defendant in the Securities Action.
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`23. Defendant Claire McDonough (“McDonough”) has served as the
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`Company’s Chief Financial Officer (“CFO”) since January 2021. McDonough
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`signed the Registration Statement for the IPO. For fiscal years 2021 and 2022,
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`McDonough received $31,634,014 and $7,009,538
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`in
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`total compensation,
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`respectively. McDonough is named as a defendant in the Securities Action.
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`24. Defendant Jeffrey R. Baker (“Baker”) has served as the Chief
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`Accounting Officer of Rivian since May 2021. Baker signed the Registration
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`Statement for the IPO. Baker is named as a defendant in the Securities Action.
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`25. Defendant Karen Boone (“Boone”) has served as a director since
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`August 2020. Boone was a member of the Audit Committee at all relevant times.
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`Boone signed the Registration Statement for the IPO. For 2022, Boone received
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`$373,755 in cash and stock. Boone is named as a defendant in the Securities
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`Action.
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`26. Defendant Jay Flatley (“Flatley”) has served a director since May
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`2021. Flatley was a member of the Audit Committee at all relevant times. Flatley
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`signed the Registration Statement for the IPO. For 2022, Flatley received $329,661
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`in cash and stock. Flatley is named as a defendant in the Securities Action.
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`27. Defendant Peter Krawiec (“Krawiec”) has served as a director since
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`February 2019. Krawiec signed the Registration Statement for the IPO. For 2022,
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`Krawiec received $311,501 in cash and stock. Krawiec is named as a defendant in
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`the Securities Action.
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`28. Defendant Rose Marcario (“Marcario”) has served as a director since
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`January 2021. Marcario signed the Registration Statement for the IPO. For 2022,
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`Marcario received $327,073 in cash and stock. Marcario is named as a defendant in
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`the Securities Action.
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`29. Defendant Sanford Schwartz (“Schwartz”) has served as a director
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`since September 2019. Schwartz signed the Registration Statement for the IPO. For
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`2002, Schwartz received $340,049 in cash and stock. Schwartz is named as a
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`defendant in the Securities Action.
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`30. Defendant Pamela Thomas-Graham (“Thomas-Graham”) served as a
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`director from August 2021 until the Company’s annual stockholder meeting on
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`June 18, 2024. Thomas-Graham was a member of the Audit Committee at all
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`relevant times. Thomas-Graham signed the Registration Statement for the IPO. For
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`2022, Thomas-Graham received $340,049 in cash and stock. Thomas-Graham is
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`named as a defendant in the Securities Action.
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`31. Defendants Scaringe, McDonough, Baker, Boone, Flatley, Krawiec,
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`Marcario, Schwartz, and Thomas-Graham are collectively referred to herein as the
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`“Individual Defendants.”
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`Relevant Non-Parties
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`32. Non-party John Krafcik has served as a director since July 2023.
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`DUTIES OF THE INDIVIDUAL DEFENDANTS
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`33. By reason of their positions as officers, directors, and/or fiduciaries of
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`Rivian and because of their ability to control the business and corporate affairs of
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`Rivian at all relevant times, the Individual Defendants owed Rivian and its
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`stockholders fiduciary obligations of good faith, loyalty, and candor, and were
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`required to use their utmost ability to control and manage Rivian in a fair, just,
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`honest, and equitable manner. The Individual Defendants were required to act in
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`furtherance of the best interests of Rivian and its stockholders so as to benefit all
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`stockholders equally and not in furtherance of their personal interests or benefit.
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`Each director and officer of the Company owes to Rivian and its stockholders a
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`fiduciary duty to exercise good faith and diligence in the administration of the
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`affairs of the Company and in the use and preservation of its property and assets,
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`and the highest obligations of fair dealing.
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`34. The Individual Defendants, because of their positions of control and
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`authority as directors and/or officers of Rivian, were able to and did, directly
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`and/or indirectly, exercise control over the wrongful acts complained of herein.
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`Because of their advisory, executive, managerial, and directorial positions with
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`Rivian, each of the Individual Defendants had knowledge of material non-public
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`information regarding the Company.
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`35. To discharge their duties, the officers and directors of Rivian were
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`required to exercise reasonable and prudent supervision over the management,
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`policies, practices, and controls of the Company. By virtue of such duties, the
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`officers and directors of Rivian were required to, among other things:
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`(a) Exercise good faith to ensure that the affairs of the Company were
`conducted in an efficient, business-like manner, so as to make it
`possible to provide the highest quality performance of their
`business;
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`(b) Exercise good faith to ensure that the Company operated in a
`diligent, honest, and prudent manner and complied with all
`applicable
`federal and state
`laws,
`rules,
`regulations and
`requirements, and all contractual obligations, and acted only within
`the scope of its legal authority;
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`(c) Exercise good faith to ensure that the Company’s communications
`with the public and with stockholders are made with due candor in
`a timely and complete fashion; and
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`(d) When put on notice of problems with the Company’s business
`practices and operations, exercise good faith in taking appropriate
`action to correct the misconduct and prevent its recurrence.
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`I.
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`Background
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`SUBSTANTIVE ALLEGATIONS
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`36. Founded in 2009 by Defendant Scaringe, Rivian designs, develops,
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`and manufactures EVs and accessories and sells them directly to customers in the
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`consumer and commercial markets.
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`37.
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`In December 2017, the Company unveiled its plans to release its EV
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`five-passenger pickup truck and EV seven-passenger SUV, which were later called
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`R1T and R1S, respectively. Each of the base models included a quad-motor. That
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`is, each of the vehicles’ four wheels was controlled by its own motor. The EVs
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`had ranges that varied between 230+ and 400+ miles depending on the battery and
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`vehicle.
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`38. Shortly after the Los Angeles Auto Show in November 2018, the
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`Company began accepting preorders for its vehicles secured by a $1,000 deposit.
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`Rivian planned to begin deliveries of the R1S and R1T in 2020, starting with 180
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`kilowatt-hour (kWh) and 135 kWh capacity battery pack offerings. For the 135
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`kWh base battery pack offering, Rivian initially priced the base models of the R1T
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`and R1S at $69,000 and $72,500, respectively.
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`39.
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`In November 2020, shortly after its EV competitor Tesla, Inc.
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`unveiled its Cybertruck for a base price of $39,000, Rivian stated that a “well-
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`equipped vehicle” would be priced at $69,000, but that base model pricing would
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`be lower than that. The basic version of the R1T was later priced at $67,500 and
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`the R1S at $70,000. This made the R1T “slightly cheaper than the three-engined
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`version of the Tesla Cybertruck ($69,900) after deducting the $7,500 tax credit. . .
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`[and] [t]he simplest Cybertruck should be available later at prices starting at 39,900
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`dollars.”1
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`40. The 135 kWh battery, or “Large pack standard” battery, would be
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`used for the first three trims of the R1T, the Launch Edition, Adventure, and
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`Explore.2 The Launch Edition started at $75,000 and would start being delivered
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`in June 2021. The Adventure and Explore models would start at $75,000 and
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`$67,500, respectively, and deliveries of these models would begin in January 2022.
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`In reality, these models were significantly underpriced relative to the Company’s
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`costs, as explained in more detail below.
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`41.
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`In November 2021, Rivian completed the IPO, selling 175.95 million
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`shares of Class A common stock at $78.00 per share for net proceeds of $13.54
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`billion.
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`1
`https://web.archive.org/web/20201113042948/https://www.electrive.com/2020/11
`/12/rivian-opens-configurator-and-reveals-prices/ (last visited August 14, 2024).
`2 The 105 kWh and 180 kWh battery pack offerings would not be included in the initial
`productions of the R1T and R1S.
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`II. The Individual Defendants Knew Price Increases Were Necessary But
`Concealed Them From Customers And Shareholders
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`42. The Individual Defendants’ statements in the IPO Registration
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`Statement, the December 16, 2021 earnings call, and the Company’s third quarter
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`2021 Form 10-Q (described infra) were highly misleading. Contrary to their
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`representations that price increases were merely hypothetical “risks,” the
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`Individual Defendants long planned to deal with the Company’s substantial losses
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`and negative gross profits by dramatically raising prices following the IPO.
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`43. The Section 220 documents produced to Plaintiffs reveal that Rivian’s
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`officers and directors
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`44.
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` Although the
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`substance of the meeting minutes is entirely redacted, it can be reasonably inferred
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`that the Board discussed and reviewed a presentation
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` The presentation demonstrates
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`48. Together, the above slides demonstrate that,
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`49.
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` During the meeting, the Board discussed a
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`presentation dated
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` Among
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`other things, the presentation contained a slide
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` Moreover, the same slide stated:
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`3 Plaintiffs reasonably infer that
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`50. Other slides in the
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` presentation also referred to
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`For example, the presentation referred to
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` and showed
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`51.
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`4 Unless otherwise stated, all emphasis in bold and italics hereinafter is added.
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`52. On October 1, 2021, Rivian filed a preliminary registration statement
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`and prospectus for the IPO on Form S-1. Rivian subsequently filed amendments to
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`the registration statement and prospectus with the SEC on Forms S-1/A on October
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`22, 2021, November 1, 2021, and November 5, 2021 (the “Registration
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`Statement”). Defendants Baker, Boone, Flatley, Krawiec, Marcario, McDonough,
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`Scaringe, Schwartz, and Thomas-Graham each signed the Registration Statement.
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`Rivian also generated a Form 424(B)(4) Prospectus dated November 9, 2021,
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`which it subsequently filed with the SEC on November 12, 2021.
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`53. The SEC declared the Registration Statement effective on November
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`9, 2021. Together with the November 9, 2021 prospectus, the Registration
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`Statement offered 153,000,000 shares of Rivian’s Class A common stock at a price
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`of $78.00 per share.
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`54.
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`In the Registration Statement, the Individual Defendants claimed the
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`negative consequences that may follow if the Company increases its EV prices to
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`counter any increase in the cost of EV materials:
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`Substantial increases in the prices for such components, materials and
`equipment would increase our operating costs and could reduce our
`margins if we cannot recoup the increased costs. Any attempts to
`increase the announced or expected prices of our vehicles in response
`to increased costs could be viewed negatively by our potential
`customers and could adversely affect our business, prospects,
`financial condition, results of operations, and cash flows.
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`55. The Registration Statement also disclosed that the Company would
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`operate at a negative gross profit per EV over the short to medium term as a result
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`of its fixed costs from investment in vehicle technology, manufacturing capacity,
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`and charging infrastructure. It stated, in relevant part:
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`Our decision to deeply vertically integrate our ecosystem has required
`substantial upfront investments in capabilities, technologies, and
`services that are often outsourced by other manufacturers. For
`example, we are making
`investments
`in vehicle
`technology,
`manufacturing capacity, and charging infrastructure, and these
`expenses will appear in our cost of revenue. We expect to operate at a
`negative gross profit per vehicle for the near term as our fixed costs
`from investments in vehicle technology, manufacturing capacity, and
`charging infrastructure are spread across a smaller product base until
`we launch additional vehicles and ramp production. This dynamic will
`cause our gross profit losses to increase on a dollar basis even as our
`revenue increases from ramping production volumes over the short to
`medium term.
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`56. On November 10, 2021, Rivian went public under the ticker “RIVN”
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`selling 175.95 million shares, inclusive of the underwriters’ overallotment option,
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`at an initial offering price of $78.00 per share. That day, the Company’s share
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`price surged and closed at $100.73 per share. Based on the expected number of
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`shares outstanding, the closing price gave Rivian a valuation of approximately $86
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`billion.
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`57.
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`58.
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` to discuss, among other things,
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` The accompanying meeting presentation showed
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`that
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`59. After the market closed on December 16, 2021, Rivian held an
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`earnings call to discuss its third quarter 2021 financial results (“3Q21 Earnings
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`Call”). During the 3Q21 Earnings Call, Defendant McDonough
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`, stating:
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`“given the inflationary market backdrop, we [] continue to evaluate the pricing for
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`our vehicles.”
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`60. Additionally, during the question-and-answer session of the 3Q21
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`Earnings Call, Wolfe Research analyst Rod Lache and Defendant Scaringe had an
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`exchange during which
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`Rod Lache
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`:
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`Claire mentioned that you’re looking at opportunities to accelerate
`your strategy. Are there things that you can do to maybe accelerate the
`ramp that you'd originally envisioned for the R1 platform just given
`the response to the product? Or, are you -- I think Claire alluded to
`inflation and looking at pricing, are you looking at opportunities to
`adjust pricing just based on what the demand is for the product?
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`RJ Scaringe
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`With regards to pricing, and certainly the backdrop of inflation that
`we're seeing, and a very strong demand for products, not just within
`our product set, but I’d say broadly within the electrified space has
`caused us to look at our pricing. And really, I’d say, recognizing the
`set of product features that we’ve been able to put together into the
`vehicles and vehicles are incredibly – you’ve had a chance to drive
`them.
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`They’re incredibly fun to drive, very capable, over 800 horsepower,
`zero to 60 in three seconds, great onroad, great off road, but also a
`great everyday vehicle. So in terms of a competitive set, we recognize
`they are very aggressively priced. So that is something that we’ve
`certainly considered and talked about quite a bit as a management
`team.
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`61. On December 17, 2021, the Individual Defendants caused the
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`Company to file the 3Q21 Report. The 3Q21 Report repeated statements found in
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`the Registration Statement characterizing price increases as “risks,” even though
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`the Individual Defendants had already decided to increase prices:
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`Substantial increases in the prices for such components, materials, and
`equipment would increase our operating costs and could reduce our
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`23
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`PUBLIC VERSION
`Dated: August 26, 2024
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`margins if we cannot recoup the increased costs. Any attempts to
`increase the announced or expected prices of our vehicles in response
`to increased costs could be viewed negatively by our potential
`customers and could adversely affect our business, prospects,
`financial condition, results of operations, and cash flows.
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`62. Rivian moved swiftly following the IPO
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` a presentation slide showing
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`PUBLIC VERSION
`Dated: August 26, 2024
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`63. The above slide lists
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`presentation
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` Another slide in the
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`64.
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`presentation that provided further information regarding
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`PUBLIC VERSION
`Dated: August 26, 2024
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`65. Another slide in the
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`26
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`PUBLIC VERSION
`Dated: August 26, 2024
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`PUBLIC VERSION
`Dated: August 26, 2024
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`III. The Truth Emerges, Shocking Customers, Shareholders, And Analysts
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`69. On March 1, 2022, Rivian sent an email to reservation holders that the
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`price of base models of the R1T and R1S would increase by 17% and 20%,
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`respectively, purportedly due to “inflationary pressure on the cost of supplier
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`components and raw materials” for causing this instability. The R1T (originally
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`listed for $67,500) was now priced at $79,500, whereas the R1S (originally listed
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`for $70,000) was now priced at $84,500. Additionally, whereas the quad-motor
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`and 135 kWh “Large pack standard” battery was previously included in the R1S
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`and R1T available base models, these features would now cost customers an extra
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`$6,000 each. With the exception of those customers close to obtaining their EVs in
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`connection with their pre-orders, the new pricing would apply to an overwhelming
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`majority of existing pre-orders as well as to all future pre-orders. The new pricing
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`information was also made available on Rivian’s website that same day.
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`70. Rivian also announced that it was offering a new “Standard” battery
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`size and a new dual-motor (one for each axle) option for both the R1T and R1S.
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`These lesser options would allow reservation holders, who originally pre-ordered
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`four-quad motors vehicles with 135 kWh battery packs, to keep their original
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`pricing. Furthermore, the Company was increasing prices for “certain options,
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`upgrades and accessories.”
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`28
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`PUBLIC VERSION
`Dated: August 26, 2024
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`

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`71. On this news, the Company’s stock price fell approximately 20.7% to
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`close at $53.56 per share on March 2, 2022, on usually heavy trading volume.
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`72. As a result of the price increase announcements, customer sentiment
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`for Rivian, particularly among R1T and R1S reservation holders, reached a low
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`point. On March 3, 2022, RBC Capital reported that “[a] scan of message boards
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`and online postings indicated there was a lot of anger among reservation holder
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`and cancellations.” On March 4, 2022, Deutsche Bank published a report noting
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`that Rivian’s EV price increases spurred “a very negative reaction in the market in
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`which many reservation holders cancelled.”
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`73. On March 3, 2022, in the face of intense backlash by customers,
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`Rivian reversed its decision to raise prices on between 71,000 and 83,000
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`reservation holders who pre-ordered R1Ts and R1Ss prior to March 1, 2022.
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`Rivian made this announcement via email to reservation holders and through a
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`letter published on Business Wire. According to a March 3, 2022 RBC Capital
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`auto analyst’s note, “[t]he roll-back on pricing is costing it ~$850mm in revenue
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`(assuming no cancellations).”
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`74. From market closing on March 2, 2022 until the close of trading on
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`March 10, 2022, Rivian’s Class A common stock price fell approximately 23.2%
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`to close at $41.16 per share.
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`29
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`PUBLIC VERSION
`Dated: August 26, 2024
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`

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`75. After the market closed on March 10, 2022, Rivian published a letter
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`to its shareholders in which it announced the Company’s fourth quarter and full
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`year 2021 financial results. In the shareholder letter, the Company disclosed that
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`its projected adjusted EBITDA for full-year 2022 would be negative $4.75 billion.
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`Rivian reported that it expected to recognize negative gross margins throughout
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`fiscal year 2022 “[a]s we continue to ramp-up our manufacturing facility, manage
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`supply chain challenges, face continued inflationary pressures, and minimize price
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`increases to customers in the near term.”
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`76. On this news, the Company’s stock price fell approximately 8% to
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`close at $38.05 per share on March 11, 2022, on unusually heavy trading volume.
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`Furthermore, the Company’s stock price continued to plummet the next trading
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`day, on unusually heavy trading volume, and closed at $35.83 per share on March
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`14, 2022.
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`IV. The Schwab Complaint
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`77. On November 4, 2021, Laura Schwab filed her wrongful termination
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`lawsuit against Rivian, Schwab v. Rivian Automotive, LLC, Case No. 30-2021-
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`01229809 (Cal. Super. Ct.). Schwab served as Vice President of Sales and
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`Marketing from November 30, 2020 through October 15, 2021, when she was
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`fired.
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`30
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`PUBLIC VERSION
`Dated: August 26, 2024
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`

`

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`78.
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`In her complaint, Schwab alleged that she was subjected to gender
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`discrimination and a toxic work environment and alleged various forms of conduct
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`setting the stage for her alleged wrongful termination, including warning
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`executives “relating to Rivian’s ability to deliver on its promises to investors.”
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`79. According to the Schwab complaint:
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`[I]t was clear that the vehicles were underpriced, and each sale
`would result in a loss [to] the company. Ms. Schwab ultimately
`contacted Dennis Lucey, Rivian’s Finance Director, and worked with
`him to develop projections showing how much of a loss the company
`would incur if Rivian did not raise prices. Ms. Schwab raised this
`issue with several executives, including Mr. Behl, Stuart Dixon
`(Director of Product Management), and Andy Zicheck (Principal
`Product Manager). Mr. Behl brushed her off. Eventually, Mr. Hunt
`[Patrick Hunt, then-Senior Director of Consumer Digital] raised the
`issue with Mr. Behl, at which point Mr. Behl agreed that they would
`need to raise the vehicle prices after the IPO.
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`80. Schwab’s pre-IPO allegations that she warned management that
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`vehicle pricing was too low
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`that the Company recognized well before the IPO that it needed to raise vehicle
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`prices to avoid significant losses, but kept this critical information hidden from
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`consumers and shareholders until after the IPO was concluded.
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`81. The Individual Defendants
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`82. According to the materials from
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`PUBLIC VERSION
`Dated: August 26, 2024
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` which included information concerning
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`The presentation stated that
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`The remainder of this section of the presentation was redacted as
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`“not relevant.”
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`83.
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`It is reasonable to infer that
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`This underscores that,
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`V. Denial Of Motion To Dismiss The Securities Action
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`84. On July 3, 2023, U.S. District Judge Josephine L. Staton denied the
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`defendants’ motion to dismiss the Amended Complaint in the Securities Action.
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`See generally Crews v. Rivian Automotive, Inc., 2023 WL 4361098 (C.D. Cal. Jul.
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`3, 2023). Judge Staton held that violations of Section 11 of the Securities Act of
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`1933 and violations of Sections 10(b) and 20(a) of the Securities Exchange Act of
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`1934 had been adequately pled. Id.
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`85. The statement in the Registration Statement and the 3Q21 10-Q that
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`Rivian “could” face reduced margins “if” it could not recoup increased materials
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`32
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`PUBLIC VERSION
`Dated: August 26, 2024
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`costs were misleading because they misrepresented “material cost increases as a
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`possibility rather than a known problem with which Rivian had been contending
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`for years already.” Id. at *8-9. Specifically, confidential witnesses reported that
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`“Rivian’s estimates of the BOM cost for each R1 unit increased between 2018 and
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`the 2021 IPO.” Id. at *9. In fact, “by 2020, the cost of the BOM exceeded
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`$100,000—significantly more than the publicly disclosed retail prices of the R1S
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`and the R1T.” Id. As a result, “Rivian had already decided that it would increase
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`prices for the R1 EVs before the IPO.” Id. at *8. Moreover, “production at scale
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`would not resolve another critical obstacle to profitability: that the BOM cost for
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`each R1 far exceeded its retail price.” Id. at *9.
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`86. The statements of potential price increases made during the 3Q21
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`Earnings Call were misleading because, due to the difference between the BOM
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`and the retail price, “a price increase was necessary regardless of inflationary
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`pressures and high demand.” Id. at *12. There was a strong inference of scienter
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`because “the inference that Rivian senior executives knew

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