By: Business Insider
June 6, 2021
The coronavirus pandemic hit the Cheesecake Factory hard. Like millions of restaurants, the company watched as most of its business disappeared overnight. By April 2020 the chain — with over 220 restaurants and 46,000 employees — was near death. The company was losing $6 million a week with just 16 weeks of cash on hand. Cheesecake Factory informed its landlords that it would not pay rent that month, and management went begging to private equity for a cash infusion that could save the company.
But regular investors who were trading the company in the public market had little inkling that Cheesecake Factory was in a tailspin. In public disclosures on March 23 and April 3, management told them that the company was “operating sustainably.” There was no mention of how the company was stiffing its landlords and hemorrhaging cash.
Why lie? If the Cheesecake Factory told the truth, its stock would have gone down, reducing the value of its business and potentially sinking its chances for a bailout from those investors rich and privileged enough to get the truth about the state of its affairs. And yet, despite this blatant attempt to deceive public investors, the Securities and Exchange Commission fined the company an embarrassingly small $125,000. Cheesecake Factory did not admit or deny guilt.