Lyft has agreed to pay a $10 million fine over a U.S. Securities and Exchange Commission charge that the ride-hailing company failed to disclose a board director’s role in the sale of $424 million worth of private shares before to its initial public offering.
The SEC said Monday that prior to Lyft’s IPO in March 2019, a board director arranged for a shareholder to sell its shares to a to a special purpose vehicle set up by an investment adviser affiliated with the same director. The SEC said this director, who the agency did not name, then contacted an investor interested in purchasing the shares through the SPV.
Lyft approved the sale and even secured a number of terms in the contract, according to the SEC. The director received “millions of dollars” in compensation from the investment adviser for his role in structuring and negotiating the deal, the SEC said. And yet, Lyft never disclosed this information.
The SEC’s order finds that the director left the Board at the time of the transaction. Lyft agreed to the fine without admitting or denying the SEC’s charge.
“The federal securities laws required Lyft to disclose that a director profited from a transaction in which Lyft itself was a participant,” said Sheldon L. Pollock, Associate Regional Director of the SEC’s New York Regional 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 did not immediately respond with comment.