Cheesecake Manufacturing unit closes with the SEC over deceptive details about Covid danger
A Cheesecake Factory restaurant in Louisville, Kentucky.
Andy Lyons | Getty Images
The Securities and Exchange Commission has charged the Cheesecake Factory with misleading investors with their Covid-19 disclosures.
This is the first time regulators have accused a company of misleading investors about the financial implications of the pandemic. Without admitting the SEC’s findings, the restaurant company has agreed to pay a fine of $ 125,000 and not commit further violations of the reporting requirements of the securities laws.
The Cheesecake Factory regulatory filings dated March 23 and April 3 were “materially false and misleading,” according to the SEC. The company said its restaurants were “running sustainably” during the pandemic when states across the country put bans on.
However, internal documents at the time showed the Cheesecake Factory was losing about $ 6 million in cash a week and only had 16 weeks of cash left. While the company decided not to include this information in its regulatory filings, it did share this information with potential private equity investors or 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 supports a number of other restaurants, including Inspire Brands.
According to the SEC, the Cheesecake Factory filing on March 23 also failed to reveal that the company had already told its landlords that it would not pay rent in April because the pandemic had destroyed its business.
The Cheesecake Factory did not immediately respond to a request from CNBC for comment.
Cheesecake Factory shares fell around 1% in premarket trading. The stock, valued at $ 1.78 billion, is roughly unchanged this year after making up for losses on positive vaccine news in recent months.