GrubMarket settles SEC charges for overstating revenue by $500 million

Investing.com -- The Securities and Exchange Commission (SEC) has settled charges against GrubMarket Inc., a private e-commerce food distributor based in California. The company was accused of giving investors financial data that was unreliable and inflated its historical revenues by about $550 million.

The SEC's order states that between November 2019 and February 2021, GrubMarket raised around $80 million from investors during a private Series D offering. The company emailed potential investors financial information that included an investor presentation and financial statements. This information was used by these potential investors for their investment analyses and decisions.

Simultaneously, GrubMarket used a different set of financial data for other corporate purposes, including in its tax filings. This data showed significantly lower historical revenues. The company should have known that the financial information it used to attract potential Series D investors, which inflated the company's historical revenues by $550 million over five years, was unreliable. However, GrubMarket did not inform any Series D investors about the substantial discrepancy in historical revenues until after the fundraising round ended.

Mark Cave, Associate Director of the SEC’s Division of Enforcement, stated that investors reasonably expect the financials they receive from startups to be accurate, reliable, and free from significant misrepresentations and omissions. He noted that GrubMarket provided investors with financial information that misrepresented the company's historical performance, while it used higher-quality financials for other business purposes. He said this practice is inconsistent with the company's obligations to investors.

The SEC's order finds that GrubMarket violated certain antifraud provisions of the federal securities laws. Without admitting or denying the SEC’s findings, GrubMarket agreed to a cease-and-desist order and will pay an $8 million civil penalty. The investigation into the matter was conducted by Benjamin Wasserman, John Rossetti, and Gary Peters and was supervised by Jeff Leasure and Mr. Cave.

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Source: Investing.com