Lyft (ticker: LYFT) is facing a significant setback as its stock takes a hit following the announcement from the Securities and Exchange Commission (SEC). The ride-hailing company has been penalized $10 million for failing to disclose a large stock transaction prior to its initial public offering.
According to the SEC, Lyft did not include crucial information in its 2019 10-K report. It failed to disclose an investor's sale of approximately 7.7 million shares, which amounted to around $424 million in cash. The transaction involved a Lyft board director at the time who facilitated the deal through a special purpose vehicle (SPV) created by an investment advisor.
While the agency's statement does not name the individuals involved, Lyft has decided to pay the settlement without admitting or denying the charges brought against it.
In its statement, the SEC mentioned that Lyft violated Section 13(a) of the Exchange Act and Rule 13a-1 thereunder. These sections oblige companies with securities registered under Section 12 of the Exchange Act to provide accurate information, documents, and annual reports as required by the Commission.
Although requested for comment, Lyft has yet to respond to the matter at hand.
As a result of this news, Lyft stock has experienced a 3.3% drop in Monday trading, pushing its year-to-date loss to 1.3%.