GrubMarket says charges on overstating revenue to investors are settled
The Securities and Exchange Commission (SEC) has announced settled charges against GrubMarket Inc., a private, California-based e-commerce food distributor, for providing investors with financial information the company should have known was unreliable and overstated its historical revenues by approximately $550 million.
The SEC released a statement stating that between November 2019 and February 2021, GrubMarket raised approximately $80 million from investors in a private Series D offering. However, while soliciting these prospective investors, the company shared financial information, including an investor presentation and financial statements, which differed from its actual financial information and reflected significantly lower historical revenues for other corporate purposes.
"In doing so, GrubMarket should have known that the financial information it was using to solicit prospective Series D investors, which overstated the company’s historical revenues by $550 million over five years, was unreliable," the statement indicates.
Even so, GrubMarket did not inform any Series D investors about the significant discrepancy in historical revenues until after the fundraising round closed.
“In our markets, when potential investors ask for and receive financial information from startups, they reasonably expect those financials to be accurate, reliable, and free from material misrepresentations and omissions,” said Mark Cave, Associate Director of the SEC’s Division of Enforcement. “Today’s order finds that GrubMarket provided investors with financial information that painted a misleading picture of the company’s historical performance while at the same time using higher-quality financials for other business purposes. That practice cannot be squared with the company’s obligations to investors.”
The SEC’s order finds that GrubMarket violated certain federal securities laws and antifraud provisions. Without admitting or denying the SEC’s findings, GrubMarket agreed to a cease-and-desist order and to pay an $8 million civil penalty.
Benjamin Wasserman, John Rossetti, and Gary Peters conducted the SEC investigation, which Jeff Leasure and Cave supervised.
GrubMarket has stated that this is a resolved issue. In an email to Freshfruitportal.com, the company said:
"This settlement resolves an investigation by the SEC commenced several years ago relating to GrubMarket’s legacy financial systems. The systems were significantly upgraded months before the SEC began its investigation. Over the past several years, GrubMarket has evolved and matured as an organization, including introducing a robust finance function and adopting best-in-class financial controls. We are pleased to have resolved this matter as we continue to position GrubMarket to capitalize on the exciting trends in food tech and e-commerce to take our business to the next level.”
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