On September 13, the SEC charged Zymergen Inc., a biotechnology company, with misleading IPO investors about the company’s market potential and sales prospects. The SEC order included the following claims against the company:  

• Zymergen claimed that it had a $1 billion market opportunity for its product, but the estimate was based on flawed and unreasonable assumptions that included product markets that were ill-suited for the product’s technical characteristics and unsupported premium pricing.   
• Zymergen provided misleading revenue forecasts to research analysts that exceeded internal estimates.   
• During the company’s first earnings call, Zymergen misled investors by misrepresenting the status of its customer pipeline while omitting significant technical and commercial problems facing the product.  

Zymergen agreed to pay a $30 million civil penalty to resolve the SEC’s charges.   

This article is part of a Fenwick "Securities Law Update" authored by David A. Bell, Ran Ben-Tzur, Amanda Rose, and Merritt Steele.