The Cheesecake Factory settled with the Securities and Exchange Commission (SEC) on Friday, agreeing to pay a $125,000 penalty after being accused of misleading investors about the pandemic’s impact on its finances.
The settlement with the restaurant chain marks the first time the SEC has charged a public company for issuing deceptive financial statements about the COVID-19 pandemic’s effect on its business. The company didn't admit to the findings, but agreed to pay the sum and avoid such violations in the future.
“It is...important that issuers who make materially false or misleading statements regarding the pandemic’s impact on their business and operations be held accountable,” SEC Chairman Jay Clayton said in a press release about the settlement.
The SEC’s settlement order reveals that Cheesecake Factory made a myriad of behind-the-scenes financial moves that indicated it was bleeding cash while at the same time claiming it was managing the pandemic’s impact well. In its SEC filings on both March 23 and April 3, Cheesecake Factory included a copy of its most recent press releases, which stated its to-go and delivery operations could sustain the business. However, in both SEC filings, the restaurant chain failed to mention it was losing $6 million in cash per week and only had enough cash to last 16 weeks.
The Cheesecake Factory has 15 days to pay the $125,000 penalty, according to the settlement order.