By Jonathan Stempel

A federal judge said Rivian Automotive must face a lawsuit claiming it defrauded shareholders during and after its blockbuster 2021 initial public offering by concealing that had underpriced its electric vehicles, leading to unpopular price hikes.

U.S. District Judge Josephine Staton in Los Angeles said shareholders could try to prove that Rivian, which is not profitable, knew it would have to raise prices on its R1S SUV and R1T pickup truck because of higher materials costs, to avoid even bigger losses.

Rivian's share price slid 39% over 10 days after the Irvine, California-based company on March 1, 2022 raised the R1S price to $84,500 from $70,000 and the R1T price to $79,500 from $67,500, angering customers on social media and elsewhere.

The company backtracked two days later, saying customers who pre-ordered vehicles before March 1 would not face the higher prices. RJ Scaringe, Rivian's founder and chief executive, apologized and told customers "we broke your trust."

In her July 3 decision, Staton called the alleged higher costs a "major obstacle to profitability unique to Rivian," not merely a "garden-variety" problem.

"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," Staton added.

Rivian spokesman Harry Porter declined to comment, saying Rivian does not discuss pending litigation.

Lawyers for Swedish pension fund Sjunde AP-Fonden, the lead plaintiff in the proposed class action, did not immediately respond to requests for comment.

Staton also refused to dismiss claims against the IPO's lead underwriters Goldman Sachs, JPMorgan Chase and Morgan Stanley.

Backed by Amazon.com, Rivian went public at $78.00 per share on Nov. 10, 2021, raising about $12 billion in that year's largest IPO.

The lawsuit covers shareholders from that date to March 10, 2022.

In morning trading, Rivian shares were down 20 cents at $20.23 on the Nasdaq.

The case, which names a different plaintiff, is Crews v. Rivian Automotive Inc et al, U.S. District Court, Central District of California, No. 22-01524.

(Reporting by Jonathan Stempel in New York; Editing by Alistair Bell)