SEC makes inquiry into startup that bought its own vegan mayo

Note to startups: don't buy your own mayo.

The Securities and Exchange Commission is reportedly investigating Hampton Creek, the potentially $1 billion company that was caught buying large quantities of the vegan mayonnaise it produces.

Hampton Creek didn't disclose its purchases, a move that could make the company look more valuable than it really was.

An SEC spokeswoman declined to comment. But according to Bloomberg, the SEC is trying to determine whether Hampton Creek "improperly recognized revenue from purchases made with company money."

Hampton Creek was founded in 2011 as a food tech startup that used new plant-based proteins to reformulate everyday foods like mayonnaise and cookie dough.

It quickly became one of the buzziest food startups and drew the attention of flashy investors like Kholsa Ventures, Founders Fund and individual billionaires like Bill Gates and Jerry Yang of Yahoo.

The vegan-mayo buyback scheme reportedly began in 2014. The startup hired contractors to buy its own product in mass quantities from Walmart, Safeway, Kroger and other grocers. Staff on the Hampton Creek team even called stores pretending to be customers asking about the product.

A call to Hampton Creek was not immediately returned.

Bloomberg first reported on the plan, citing information from former contractors, receipts from the purchases, emails, expense reports and other documents.

After inflating its value through this strategy, Hampton Creek raised $90 million from investors.

In the midst of these allegations, CEO Josh Tetrick told his staff that the company is on track for a $1.1 billion valuation, a huge number for a five-year-old food-tech startup.

The SEC inquiry is a preliminary step, so Hampton Creek could walk away without facing any consequences.

Tetrick has denied the accusations, claiming the buyback program was small in scale and part of a quality-check initiative. Other Hampton Creek staff have countered that claim.

The vegan food startup makes the plant-based packaged food products Just Mayo, Just Cookie Dough and Just Cookies.

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Editor's note: This article has been amended to reflect that Hampton Creek was subject to an SEC inquiry, not an investigation.