SEC Charges Zymergen Inc. With Misleading IPO Investors About Company’s Market Potential and Sales Prospects

The Securities and Exchange Commission today announced settled charges against Zymergen Inc., an Emeryville, California-based biotechnology company, for misleading IPO investors about its overall market potential, revenue prospects, and customer pipeline for its only commercially available product, an electronics film named Hyaline. Zymergen raised approximately $530 million through its IPO in April 2021 and filed for bankruptcy in 2023. Zymergen agreed to pay a $30 million civil penalty to resolve the SEC's charges.

According to the SEC's order, Zymergen claimed that it had a $1 billion electronics display market opportunity for Hyaline, but the estimate was based on flawed and unreasonable assumptions that included product markets that were poor fits for Hyaline's technical characteristics and unsupported premium pricing. The SEC's order also finds that Zymergen provided misleading revenue forecasts to research analysts that far exceeded internal estimates. Additionally, the order finds that Zymergen misled investors during its first public earnings call by misrepresenting the status of Hyaline's customer pipeline while omitting significant technical and commercial problems facing the product.

"Pre-revenue and early-stage companies that seek to tap the capital markets must do so with reasonable estimates of their market potential," said Monique C. Winkler, Director of the SEC's San Francisco Regional Office. "Today's order finds that Zymergen failed to satisfy this obligation when it misled investors with what amounted to unsupported hype."

The SEC's order finds that Zymergen violated certain antifraud provisions of the federal securities laws. Without admitting or denying the SEC's findings, and subject to bankruptcy court approval, Zymergen agreed to a cease-and-desist order and to pay the civil penalty referenced above.

The SEC's investigation was conducted by Anthony Moreno and Eli Greenstein of the San Francisco Regional Office, with assistance from David Baddley and Brent Smyth, and was supervised by Rahul Kolhatkar, Alistaire Bambach, and Jason H. Lee.