SEC charges GrubMarket for overstating revenue by $550M

The Securities and Exchange Commission settled charges on Friday against GrubMarket, a private, California-based e-commerce food distributor, for overstating revenue to investors by approximately $550 million.

According to the SEC's order, from November 2019 to February 2021, GrubMarket raised approximately $80 million in a private Series D funding round. When soliciting prospective investors, the company emailed them unreliable financial information to consider in their analysis and decision-making. Simultaneously, the company was using a different set of financial information, including in its tax filings, that reflected significantly lower revenues for other corporate purchases. 

Graeme Sloan/Bloomberg

"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 a five-year period, was unreliable," the SEC announcement reads. "Even so, GrubMarket did not inform any Series D investors about the significant discrepancy in historical revenues until after the fundraising round closed."

The SEC's order finds that GrubMarket violated antifraud provisions of the federal securities laws. Without admitting or denying the findings, GrubMarket agreed to a cease-and-desist order and to pay an $8 million civil penalty.

"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," Mark Cave, associate director of the SEC's Division of Enforcement, said in a statement Friday. "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."