Lyft has reached a $10 million settlement with the Securities and Exchange Commission (SEC) over allegations that the ride-hailing company failed to disclose a board member’s involvement in a pre-IPO stock sale. According to the SEC, prior to Lyft’s initial public offering in 2019, a board director arranged for a shareholder to sell $424 million worth of private shares to a special purpose vehicle set up by an affiliated investment adviser. The director then connected with an interested investor to facilitate the purchase of these shares.
The SEC stated that Lyft approved the sale and had negotiated specific terms within the contract, effectively making Lyft a participant in the transaction. The SEC emphasized that the director’s status on the board and his compensation of millions of dollars from the investment adviser for his role in structuring and negotiating the deal made him a related person. Consequently, Lyft should have disclosed this transaction in its 2019 annual report. The director resigned from Lyft’s board following the completion of the deal, according to the SEC.
Sheldon Pollock, associate regional director of the SEC’s New York Office, emphasized that the federal securities laws required Lyft to disclose the director’s profit from a transaction in which Lyft itself was involved.