SEC Charges Lyft Over Board Member's Pre-IPO Share Sale

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The U.S. Securities and Exchange Commission (SEC) charged ride-hailing firm Lyft Inc. (LYFT) for failing to disclose the involvement of one of its board members in a share sale prior to the company's initial public offering (IPO).

Key Takeaways

  • The SEC announced charges against ride-hailing firm Lyft over a pre-IPO share sale.
  • The regulator said a board member arranged the transfer of shares to an affiliated investment firm.
  • Lyft agreed to a $10 million penalty without admitting or denying the SEC's finding.

The SEC fined Lyft $10 million for failing to disclose the role of one of its board members in the sale of around $424 million worth of private shares, prior to the firm's 2019 IPO.

According to the complaint, the director arranged for an investor's sale of shares to a special purpose vehicle (SPV) with which the director was affiliated. The director, who left the board at the time of the transaction, received millions of dollars in compensation for "structuring and negotiating the deal," according to the SEC's complaint.

Lyft, which approved the sale and secured a number of terms in the contract, was also a participant in the transaction, the SEC said. Lyft failed to disclose this information regarding the sale in its Form 10-K for 2019. Lyft had 14 members on its board at the time of its IPO, including eight non-employee directors. The company agreed to the penalty without admitting or denying the SEC's findings.

“The federal securities laws required Lyft to disclose that a director profited from a transaction in which Lyft itself was a participant,”?said Sheldon Pollock, associate regional director of the SEC’s New York office.?"We remain vigilant in ensuring investors are not deprived of critical information about transactions occurring close to a company’s initial public offering.”?

Lyft shares were down more than 3% in midday trading on Monday to around $10.90 after achieving a $72 share price on its IPO debut.

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  1. SEC. "SEC Charges Lyft with Failure to Disclose Board Member’s Financial Interest in Sale."

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