Cheesecake Factory (CAKE) - Get Report shares eased after the restaurant chain settled Securities and Exchange Commission charges that it made "misleading disclosures" about the effect of the coronavirus pandemic.
The SEC said the action against the Calabasas Hills, Calif., company is its first to charge a public company with misleading investors about the financial effects of the pandemic.
The company agreed to a $125,000 penalty without admitting or denying the SEC’s findings.
Cheesecake Factory shares recently traded at $39.67, up 0.6%. The shares had firmed 1.5% year to date through Thursday.
Many restaurants have struggled during the pandemic, as their dining rooms were closed for months and consumers stayed at home.
“In its SEC filings on March 23 and April 3, 2020, The Cheesecake Factory stated that its restaurants were ‘operating sustainably’ during the covid-19 pandemic,” the SEC said in a statement.
“According to the [SEC] order, the filings were materially false and misleading because the company's internal documents at the time showed that the company was losing approximately $6 million in cash per week and that it projected that it had only 16 weeks of cash remaining.”
"During the pandemic, many public companies have discharged their disclosure obligations in a commendable manner.” SEC Chairman Jay Clayton said in a statement.
“It is … so important that issuers who make materially false or misleading statements regarding the pandemic’s impact on their business and operations be held accountable."
The SEC found that Cheesecake Factory- failed to disclose that it had informed its landlords that it would not pay rent in April due to the pandemic’s impact on its business.