Cheesecake Factory Reaches Deal With SEC On Misleading Covid Risk Disclosures

The Securities and Exchange Commission has indicted and settled with the Cheesecake Factory for misleading investors with its Covid-19 disclosures.

This is the first time the regulator has accused a company of misleading investors about the financial impacts of the pandemic. Without admitting the SEC’s findings, the restoration company agreed to pay a fine of $ 125,000 and not to commit other violations of the reporting provisions of the securities laws.

The Cheesecake Factory’s March 23 and April 3 regulatory filings were “materially false and misleading,” according to the SEC. The company said its restaurants were “operating sustainably” during the pandemic, as states across the country put locks in place.

But internal documents at the time showed the Cheesecake Factory was losing about $ 6 million in cash per week, with only 16 weeks of cash left. Although the company chose not to include this information in its regulatory documents, it did share it with potential investors or private equity lenders as it sought additional liquidity during the crisis.

Later in April, Cheesecake Factory would receive a $ 200 million investment from Roark Capital, a private equity firm that backs a number of other restaurants, including Inspire Brands.

According to the SEC, Cheesecake Factory’s March 23 filing also did not reveal that the company had previously told its landlords that it would not pay rent in April due to the devastation of its business by the pandemic.

The Cheesecake Factory did not immediately respond to a request for comment from CNBC.

Cheesecake Factory shares fell about 1% in pre-market trading. The stock, which has a market value of $ 1.78 billion, is roughly flat so far this year after recovering losses following positive vaccine news in recent months.