Ride-share company Lyft has reached a settlement with the Securities and Exchange Commission (SEC) in a case involving the failure to disclose a pre-IPO share sale. The company has agreed to pay a $10 million fine to resolve the civil charges.
The transaction in question occurred prior to Lyft’s initial public offering in March 2019. Billionaire Carl Icahn, a former board member of Lyft, sought to sell 7.7 million shares, equivalent to a 2.6% stake in the company. Initially, Lyft’s board rejected the sale due to concerns about potential insider-trading issues.
However, another board member, Jonathan Christodoro, proposed a solution allowing the shares to be sold. Behind the scenes, Christodoro arranged for the shares to be purchased at a significant discount by another investor, George Soros, through a special purpose vehicle managed by his investment firm.
This undisclosed transaction resulted in the SEC charging Lyft with a failure to disclose the involvement of Icahn and Christodoro. The company has now agreed to pay the $10 million fine to settle the case.
This settlement serves as a reminder of the importance of transparency in IPO processes, as well as the potential legal consequences of failing to disclose relevant information.
Lyft’s $10 million fine highlights the need for companies to uphold transparency and fully disclose relevant information in IPOs. The case involving Carl Icahn and Jonathan Christodoro serves as a cautionary tale for companies and investors alike. Upholding ethical standards and adhering to regulatory requirements should always be a top priority for businesses in order to maintain trust and avoid legal repercussions.
Lyft Faces SEC Settlement Over Undisclosed Insider Transaction
Lyft, the popular ride-hailing company, has reached a settlement agreement with the Securities and Exchange Commission (SEC) over an undisclosed insider transaction. The SEC revealed that the transaction, valued at $424 million or approximately $55 per share, took place before Lyft’s initial public offering (IPO), where shares were eventually priced at $72 each.
According to the SEC, the undisclosed transaction involved Jonathan Christodoro, who stepped down from Lyft’s board just before the IPO. Christodoro was set to receive $9.2 million in fees for his role in arranging the transaction, but this amount was later negotiated down to a lower seven-digit figure.
The investigation discovered that Christodoro failed to inform Lyft of his compensation agreement and Lyft failed to file the necessary disclosures with the SEC. This failure to disclose violated federal securities regulations, which require companies to reveal any insider transactions in which they are involved.
Sheldon Pollock, from the SEC’s New York office, emphasized the importance of transparency in such cases, stating, “The federal securities laws required Lyft to disclose that a director profited from a transaction in which Lyft itself was a participant. We remain vigilant in ensuring investors are not deprived of critical information about transactions occurring close to a company’s initial public offering.”
It is worth noting that the settlement agreement is only with Lyft and does not name billionaire investors Carl Icahn or George Soros, both of whom were involved in the transaction along with Christodoro.
Representatives for Lyft, Icahn, and Christodoro have not yet responded to requests for comment, while a representative for Soros declined to comment.