Shares of Lyft Inc. (LYFT) saw a decline of 3.0% in morning trading on Monday. This came after the U.S. Securities and Exchange Commission (SEC) revealed that it has charged the ride-share company for not disclosing a board member's involvement in a shareholder's sale of approximately $424 million worth of stock prior to Lyft's initial public offering.
As part of an agreement with the SEC, Lyft has consented to paying a $10 million civil penalty and accepting a cease-and-desist order. It is important to note that this settlement does not require Lyft to admit or deny the SEC's findings.
According to the SEC's order, a board member of Lyft played a crucial role in brokering the sale of shares by a shareholder before the company went public in March 2019. This implicates Lyft as a participant in the transaction since it approved the deal. In addition, the board member received substantial compensation for their involvement in the arrangement.
Despite this setback, it is worth mentioning that Lyft's stock has experienced a 6.7% increase over the past three months. In comparison, shares of its rival, Uber Technologies Inc. (UBER), have risen by 8.1%. Meanwhile, the S&P 500 (SPX) has reflected a modest gain of 0.85%.
Lyft's failure to disclose this significant sale by one of its board members has prompted regulatory action, resulting in financial penalties and a cease-and-desist order. This development highlights the importance of transparent and accurate disclosure practices within publicly traded companies.