13 posts categorized "My Favorite Risk Factors"

My Favorite Risk Factors in the Twitter S-1

Yesterday's post laid out five initial thoughts about the Twitter S-1. Here now are My Favorite Risk FactorsTM from Twitter's filing of last week.

  1. "We generate a substantial majority of our revenue based upon engagement by our users with the ads that we display. If people do not perceive our products and services to be useful, reliable and trustworthy, we may not be able to attract users or increase the frequency of their engagement with our platform and the ads that we display. A number of consumer-oriented websites that achieved early popularity have since seen their user bases or levels of engagement decline, in some cases precipitously. There is no guarantee that we will not experience a similar erosion of our user base or engagement levels. A number of factors could potentially negatively affect user growth and engagement, including if . . . users believe that their experience is diminished as a result of the decisions we make with respect to the frequency, relevance and prominence of ads that we display[.]"
  2. G564001ifc"We seek to foster a broad and engaged user community, and we encourage world leaders, government officials, celebrities, athletes, journalists, sports teams, media outlets and brands to use our products and services to express their views to broad audiences. . . . If we experience a decline in the number of users or a decline in user engagement, including as a result of the loss of world leaders, government officials, celebrities, athletes, journalists, sports teams, media outlets and brands who generate content on Twitter, advertisers may not view our products and services as attractive for their marketing expenditures, and may reduce their spending with us which would harm our business and operating results."
  3. "The substantial majority of our revenue is currently generated from third parties advertising on Twitter. We generated 85% and 87% of our revenue from advertising in 2012 and the six months ended June 30, 2013, respectively. We generate substantially all of our advertising revenue through the sale of our three Promoted Products: Promoted Tweets, Promoted Accounts and Promoted Trends. . . . Our advertising revenue could be adversely affected by a number of other factors, including . . . our inability to help advertisers effectively target ads, including as a result of the fact that we do not collect extensive private personally identifiable information directly from our users and that we do not have real-time geographic information for all of our users [and] the impact of new technologies that could block or obscure the display of our ads[.]"
  4. "In order to deliver high quality products and services, it is important that our products and services work well with a range of operating systems, networks, devices, web browsers and standards that we do not control."
  5. "[W]e face challenges in providing certain advertising products, features or analytics in certain international markets, such as the European Union, due to government regulation."
  6. “'Spam' on Twitter refers to a range of abusive activities that are prohibited by our terms of service and is generally defined as unsolicited, repeated actions that negatively impact other users with the general goal of drawing user attention to a given account, site, product or idea. This includes posting large numbers of unsolicited mentions of a user, duplicate Tweets, misleading links (e.g., to malware or click-jacking pages) or other false or misleading content, and aggressively following and un-following accounts, adding users to lists, sending invitations, retweeting and favoriting Tweets to inappropriately attract attention. Our terms of service also prohibit the creation of serial or bulk accounts, both manually or using automation, for disruptive or abusive purposes, such as to tweet spam or to artificially inflate the popularity of users seeking to promote themselves on Twitter. Although we continue to invest resources to reduce spam on Twitter, we expect spammers will continue to seek ways to act inappropriately on our platform. In addition, we expect that increases in the number of users on our platform will result in increased efforts by spammers to misuse our platform. We continuously combat spam, including by suspending or terminating accounts we believe to be spammers and launching algorithmic changes focused on curbing abusive activities. Our actions to combat spam require the diversion of significant time and focus of our engineering team from improving our products and services. If spam increases on Twitter, this could hurt our reputation for delivering relevant content or reduce user growth and user engagement and result in continuing operational cost to us."
  7. "As of June 30, 2013, we had approximately 2,000 employees, an increase of over 1,800 employees since January 1, 2010."
  8. "There is . . . a risk that one or more of our trademarks could become generic, which could result in them being declared invalid or unenforceable. For example, there is a risk that the word “Tweet” could become so commonly used that it becomes synonymous with any short comment posted publicly on the Internet, and if this happens, we could lose protection of this trademark."
  9. "Our Innovator’s Patent Agreement, or IPA, also limits our ability to prevent infringement of our patents. In May 2013, we implemented the IPA, which we enter into with our employees and consultants, including our founders. The IPA, which applies to our current and future patents, allows us to assert our patents defensively. The IPA also allows us to assert our patents offensively with the permission of the inventors of the applicable patent. . . . While we may be able to claim protection of our intellectual property under other rights, such as trade secrets or contractual obligations with our employees not to disclose or use confidential information, we may be unable to assert our patent rights against third parties that we believe are infringing our patents, even if such third parties are developing products and services that compete with our products and services. For example, in the event that an inventor of one of our patents leaves us for another company and uses our patented technology to compete with us, we would not be able to assert that patent against such other company unless the assertion of the patent right is for a defensive purpose. . . . In addition, the terms of the IPA could affect our ability to monetize our intellectual property portfolio."

On the risk factor about Twitter's innovative IP agreement with its employee inventors, see this prior post, Patent Experts Disassemble Twitter's Employee Patent Assignment.

Five initial thoughts about the Twitter S-1

I've read only the prospectus summary and merely skimmed the risk factors, so the following comments are preliminary.

  1. Respect for users. The drafting in the Twitter S-1 is careful to distinguish between content, which is always contributed by users, newsmakers or advertisers, and products and services, which are the contributions of Twitter, the company. This is important. It may reflect an embedded corporate culture that will save Twitter from Facebook's regressive indifference to user autonomy.
  2. G564001g06x44Asymmetry and mass-reach. That said, products and services impact or potentially even drive what content is presented. The document is tense with conflict between respect for the originating asymmetrical nature of user interaction on Twitter, and an inorganic imperative to make Twitter an effective broadcast channel for brand marketers, political spin doctors, journalists and advertisers.
  3. Spam and advertising. The tension is especially evident in a risk factor about spam. The drafter provides a generic definition of spam that fairly and without irony encompasses promoted tweets.
  4. The revenue model overlooks two of three constituents. The prospectus summary speaks of three key categories of constituents: users, platform partners, and advertisers. The disclosure very nearly apologizes for not generating revenue directly from users or platform partners, but does point out that increased activity by the latter two constituents makes the system more valuable for advertisers.
  5. A hedge against advertising's decline. Question for Twitter: why not monetize directly from users and platform partners? If the fear is, many users and platform partners will not pay, then let those thrifty constituents continue to use Twitter for free, and advertise to them. Consider this move as extending to advertisers, too, Twitter's originating efficiencies of asymmetry: promoters will never have to pay for reaching people who have low tolerance for spam. This move would also be a hedge against the declining value of targeted advertising; and users and platform partners who pay can be charged at least the value they remove from the advertising network.

My Favorite Risk Factors in the Trulia IPO Prospectus

Trulia's IPO priced last week, and it seems to have gone off well!

No snideness or cynicism in this installment of the "My Favorite Risk Factors"TM series, but there are some interesting disclosures in Trulia's IPO prospectus to note:

  1. Beware users who withhold or bear bad information. "Our success depends on our ability to provide consumers with the information they seek, which in turn depends in part on the content contributed by our users. We believe that one of our primary competitive advantages is the quality and quantity of the user-generated content in our marketplace, and that information is one of the main reasons consumers use our platform. If we are unable to provide consumers with the information they seek because our users do not contribute content, or because the content that they contribute is not helpful and reliable, the number of consumers visiting our website and mobile applications may decline."
  2. Speed is of the essence. "[W]e update the listing information that we provide on our website and mobile applications on a daily basis. To the extent that we are no longer able to update information in our marketplace on a timely basis, or if consumers begin to expect updates in a more timely manner, we may be forced to make investments which allow us to update information with higher frequency. There can be no assurance that we will be able to provide information at a pace necessary to satisfy consumers in a cost-effective manner, or at all."
  3. Need to diversity revenue base. "In each of the years ended December 31, 2010 and 2011, the ten largest advertising partners for the respective period accounted for more than 50% of our media revenue."
  4. Single point of failure."Substantially all of the communications, network, and computer hardware used to operate our website and mobile applications is located at a single colocation facility in Santa Clara, California."
  5. Patent fight with Zillow. "[O]n September 12, 2012, Zillow, Inc., or Zillow, filed a lawsuit against us in the United States District Court for the Western District of Washington, alleging that we infringe on one U.S. patent held by it. The lawsuit alleges that one component of our Trulia Estimates feature infringes upon Zillow’s patent insofar as Trulia Estimates allows homeowners to claim their homes and provide additional information about the properties, which enables us to update the valuation estimates for such properties. We started offering our Trulia Estimates feature in 2011. Zillow is seeking declaratory judgment that its patent is valid and enforceable, a permanent injunction against the alleged infringement, compensatory damages, and attorneys’ fees. This litigation could cause us to incur significant expenses and costs. In addition, the outcome of any litigation is inherently unpredictable, and as a result of this litigation, we may be required to pay damages; an injunction may be entered against us that requires us to change our Trulia Estimates feature; or a license or other right to continue to deliver an unmodified version of Trulia Estimates may not be made available to us at all or may require us to pay ongoing royalties and comply with unfavorable terms. Any of these outcomes could harm our business. Even if we were to prevail, this litigation could be costly and time-consuming, could divert the attention of our management and key personnel from our business operations, and may discourage consumers, real estate professionals, and advertisers from using our marketplace."
  6. Valuing residential real estate. "We revise our algorithms regularly, which may cause valuations to differ from those previously provided."
  7. JOBS Act in action. "We are an 'emerging growth company,' as defined in the Jumpstart Our Business Startups Act enacted in April 2012, and, for as long as we continue to be an 'emerging growth company,' we may choose to take advantage of exemptions from various reporting requirements applicable to other public companies but not to 'emerging growth companies,' including, but not limited to, not being required to have our independent registered public accounting firm audit our internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved."

House for sale

Photo: Michael Coghlan / Flickr.

My Favorite Risk Factors in the Facebook S-1

Below are my favorite risk factors in the Facebook S-1 filed yesterday. The headings are my riffs on what's being said. The text within quotation marks are verbatim excerpts.

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  1. The Threat of the Open Web: "A decrease in user retention, growth, or engagement could render Facebook less attractive to developers and advertisers, which may have a material and adverse impact on our revenue, business, financial condition, and results of operations. Any number of factors could potentially negatively affect user retention, growth, and engagement, including if . . . our current or future products, such as the Facebook Platform, reduce user activity on Facebook by making it easier for our users to interact and share on third-party websites."
  2. User Disdain for Advertising: "The substantial majority of our revenue is currently generated from third parties advertising on Facebook. . . . Our advertising revenue could be adversely affected by a number of other factors, including: . . . increased user access to and engagement with Facebook through our mobile products, where we do not currently directly generate meaningful revenue, particularly to the extent that mobile engagement is substituted for engagement with Facebook on personal computers where we monetize usage by displaying ads and other commercial content; . . . the degree to which users opt out of social ads or otherwise limit the potential audience of commercial content; . . . [and] the impact of new technologies that could block or obscure the display of our ads and other commercial content[.]"
  3. Windows Phone Alone Won't Cut It: "We are dependent on the interoperability of Facebook with popular mobile operating systems that we do not control, such as Android and iOS, and any changes in such systems that degrade our products’ functionality or give preferential treatment to competitive products could adversely affect Facebook usage on mobile devices."
  4. Conflicts with Independent Developers: "From time to time, we have taken actions to reduce the volume of communications from apps to users on Facebook with the objective of enhancing the user experience, and such actions have reduced distribution from, user engagement with, and our monetization opportunities from, apps on Facebook. In some instances, these actions have adversely affected our relationships with Platform developers."
  5. The Google: "Certain competitors, including Google, could use strong or dominant positions in one or more markets to gain competitive advantage against us in areas where we operate including: by integrating competing social networking platforms or features into products they control such as search engines, web browsers, or mobile device operating systems; by making acquisitions; or by making access to Facebook more difficult."
  6. Those Pesky Nobodies Who Think They Deserve Residuals Like Celebrities Get: "[T]he interpretation of some laws and regulations that govern the use of names and likenesses in connection with advertising and marketing activities is unsettled and developments in this area could affect the manner in which we design our products, as well as our terms of use."
  7. No Good Deeds Go Unpunished: "[W]e regularly contribute software source code under open source licenses and have made other technology we developed available under other open licenses, and we include open source software in our products. For example, we have contributed certain specifications and designs related to our data center equipment to the Open Compute Project Foundation, a non-profit entity that shares and develops such information with the technology community, under the Open Web Foundation License. As a result of our open source contributions and the use of open source in our products, we may license or be required to license innovations that turn out to be material to our business and may also be exposed to increased litigation risk."
  8. Even We Fear Patent Trolls: "Companies in the Internet, technology, and media industries own large numbers of patents, copyrights, trademarks, and trade secrets, and frequently enter into litigation based on allegations of infringement, misappropriation, or other violations of intellectual property or other rights. In addition, various 'non-practicing entities' that own patents and other intellectual property rights often attempt to aggressively assert their rights in order to extract value from technology companies. We presently are involved in many such lawsuits, and as we face increasing competition and gain an increasingly high profile, including in connection with our initial public offering, we expect the number of patent and other intellectual property claims against us to grow."
  9. A Fine Point About Fiduciary Duties: " . . . Mr. Zuckerberg has the ability to control the outcome of matters submitted to our stockholders for approval, including the election of directors and any merger, consolidation, or sale of all or substantially all of our assets. . . . As a board member and officer, Mr. Zuckerberg owes a fiduciary duty to our stockholders and must act in good faith in a manner he reasonably believes to be in the best interests of our stockholders. As a stockholder, even a controlling stockholder, Mr. Zuckerberg is entitled to vote his shares, and shares over which he has voting control as a result of voting agreements, in his own interests, which may not always be in the interests of our stockholders generally."
  10. Our Peeps Ain't in Romney's Tax Bracket: "We anticipate that we will expend substantial funds to satisfy tax withholding and remittance obligations on a date approximately six months following our initial public offering, when we will settle a portion of our RSUs granted prior to January 1, 2011 (Pre-2011 RSUs). On the settlement date, we plan to withhold and remit income taxes at applicable minimum statutory rates based on the then-current value of the underlying shares. We currently expect that the average of these withholding tax rates will be approximately 45%. If the price of our common stock at the time of settlement were equal to the midpoint of the price range on the cover page of this prospectus, we estimate that this tax obligation would be approximately $         billion in the aggregate."
  11. Watch Out Amazon: "In 2011, we began serving our products from data centers owned by Facebook using servers specifically designed for us. We plan to continue to significantly expand the size of our infrastructure, primarily through data centers that we design and own. The infrastructure expansion we are undertaking is complex, and unanticipated delays in the completion of these projects or availability of components may lead to increased project costs, operational inefficiencies, or interruptions in the delivery or degradation of the quality of our products."

Photo by Vincent Gallegos/Flickr.

Regulatory Risk Factors in the Carlyle Group S-1

According to its website, The Carlyle Group has invested $48 billion in 414 private equity transactions over 24 years, with almost 10% of this amount constituting its own capital.

W83442a2w8344209 (1)The Carlyle Group is preparing to go public. There are some interesting risk factors in the S-1 registration statement relating to use of leverage in investments, continued control of prior owners following the offering, and other topics. But I was drawn to the risk factors having to do with the regulatory environment. It's a different angle from which to think about the financial crisis, financial regualtory reform, and the scourge of lobbying and campaign contributions.

The #Occupy landscape, you might say, from the lenses of 1% glasses:

  1. "If legislation were to be enacted by the U.S. Congress or any state or local governments to treat carried interest as ordinary income rather than as capital gain for tax purposes, such legislation would materially increase the amount of taxes that we and possibly our unitholders would be required to pay, thereby adversely affecting our ability to recruit, retain and motivate our current and future professionals."
  2. "[W]e depend on our headquarters in Washington, D.C., where most of our administrative and operations personnel are located, and our office in Arlington, Virginia, which houses our treasury and finance functions, for the continued operation of our business."
  3. "Regulatory focus on our industry is likely to intensify if, as has happened from time to time, the alternative asset management industry falls into disfavor in popular opinion or with state and federal legislators, as the result of negative publicity or otherwise."
  4. "On October 11, 2011, the FSOC issued a proposed rule and interpretive guidance regarding the process by which it will designate nonbank financial companies as systemically important. The regulation details a three-stage process, with the level of scrutiny increasing at each stage. During Stage 1, the FSOC will apply a broad set of uniform quantitative metrics to screen out financial companies that do not warrant additional review. The FSOC will consider whether a company has at least $50 billion in total consolidated assets and whether it meets other thresholds relating to credit default swaps outstanding, derivative liabilities, loans and bonds outstanding, a minimum leverage ratio of total consolidated assets to total equity of 15 to 1, and a short-term debt ratio of debt (with maturities less than 12 months) to total consolidated assets of 10%. A company that meets both the asset test and one of the other thresholds will be subject to additional review. Although it is unlikely that we would be designated as systemically important under the process outlined in the proposed rule, the designation criteria could evolve over time. If the FSOC were to determine that we were a systemically important nonbank financial company, we would be subject to a heightened degree of regulation, which could include a requirement to adopt heightened standards relating to capital, leverage, liquidity, risk management, credit exposure reporting and concentration limits, restrictions on acquisitions and being subject to annual stress tests by the Federal Reserve."
  5. "In June 2010, the SEC approved Rule 206(4)-5 under the Advisers Act regarding 'pay to play' practices by investment advisers involving campaign contributions and other payments to government clients and elected officials able to exert influence on such clients. The rule prohibits investment advisers from providing advisory services for compensation to a government client for two years, subject to very limited exceptions, after the investment adviser, its senior executives or its personnel involved in soliciting investments from government entities make contributions to certain candidates and officials in position to influence the hiring of an investment adviser by such government client."
  6. "In September 2010, California enacted legislation, which became effective in January 2011, requiring placement agents who solicit funds from the California state retirement systems, such as CalPERS and the California State Teachers’ Retirement System, to register as lobbyists. In addition to increased reporting requirements, the legislation prohibits placement agents from receiving contingent compensation for soliciting investments from California state retirement systems. New York City has enacted similar measures, which became effective on January 1, 2011, that require asset management firms and their employees that solicit investments from New York City’s five public pension systems to register as lobbyists. Like the California legislation, the New York City measures impose significant compliance obligations on registered lobbyists and their employers, including annual registration fees, periodic disclosure reports and internal recordkeeping, and also prohibit the acceptance of contingent fees. Moreover, other states or municipalities may consider similar legislation as that enacted in California and New York City or adopt regulations or procedures with similar effect. These types of measures could materially and adversely impact our business."

Chart of The Carlyle Group's organizational structure is from the S-1.

My Favorite Risk Factors in the Macho Uno Racing Registration Statement

Thanks to Chris Hitt and the Blogmosaic blog for pointing out that this past week has seen a flurry of S-1 filings by hopefuls in the horse racing business.

Hitt's post gives an overview. But you know the drill here: cull out the most interesting risk factors.

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So here's my selection, seven risk factors from the S-1 filing of Macho Uno Racing Corporation, filed Wednesday this week.

  1. "The business of training and racing thoroughbred racehorses is a high-risk venture and most racehorse ownership is not profitable. In particular, studies in the U.S. market have concluded that financial returns from owning racehorses are negative in the aggregate."
  2. "[W]e estimate that approximately 27% of the offering proceeds will be used to pay expenses related to the offering and ongoing legal, accounting and other administrative expenses, most of which would not ordinarily accompany an investment in thoroughbred racehorses."
  3. "Over the past twenty years, live attendance at horse racetracks in the U.S. and Canada has declined substantially. The total number of races declined from 81,279 in 1990 to 52,771 in 2010. Pari-mutuel wagering on thoroughbred horseracing has declined from a peak of $15.7 billion in 2003 to $11.9 billion in 2010. U.S. and Canadian purses, which represent the amount of available winnings in United States and Canadian thoroughbred horse races (including monies not won and returned to state breeder and other funds), declined by about 4.8% over the same period. A recent study commissioned by The Jockey Club indicated that thoroughbred horseracing’s core fan base is shrinking, that fans wager less on thoroughbred horseracing than they did a year ago and that wagers, or “handle”, per race has declined in most racing categories since 2000. The number of race days has also declined significantly. Since 1999, more than 25% of races, excluding major racing events such as the Kentucky Derby, the Belmont Stakes, the Preakness Stakes and the Breeder’s Cup and other racing events held on the same day, have been inadequately funded, meaning that the live handle contribution from all sources to the tracks and purse account was less than the purse paid out to horsemen."
  4. "Studies have shown that the likelihood of realizing sufficient proceeds from the racing and ultimate sale of a thoroughbred racehorse to cover its purchase price and maintenance costs during the period of ownership increases with price up to $100,000 and is lower for horses with purchase prices above $100,000 than for lower priced horses. A possible explanation for the latter relationship is that horses whose ancestry and athleticism suggest that they might, after training, qualify for higher level stakes races carry a premium based on prestige or other intangible factors rather than the likely economic benefits of ownership. We have acquired 12 horses that were purchased by Alpen House for $50,000 or less, 3 horses that were purchased by Alpen House for $100,000 or more (including one horse that was purchased for $210,000) and 5 horses that were purchased by Alpen House for more than $50,000 but less than $100,000. We purchased horses above $100,000 because we believe that prospective investors will be attracted by the potential opportunity of the company to race one or more of its horses in higher level stakes races, but there is no assurance that any of our horses will in fact qualify for such races or that any of our horses that do qualify for such races will win any purses."
  5. "Our horses were acquired by Alpen House principally at auctions during 2011. Prior to the racing of any of our horses, each horse must be properly trained to compete. We anticipate that the earliest any of our horses will be entered into a race is approximately August 2012. No assurance can be given that any of our horses will be entered into a race by such date. Thoroughbreds typically require significant recovery periods between races and overall, we estimate that prior to our liquidation, our horses that we own for our entire operating period will have been entered into an average of approximately six races per horse, limiting the potential revenues that can be generated from race winnings during our anticipated operating period. No assurance can be given that any of our horses will be entered into any particular number of races."
  6. "Racetrack conditions, such as a grass or a muddy racetrack (as opposed to a dirt racetrack or all-weather track), may further limit our ability to race a horse because we may decline a racing opportunity when we believe a horse underperforms on the surface on which the race is being run or if we believe conditions are such as to expose the horse to undue risk of injury."
  7. "Certain of our horses have been injured or may become injured prior to the completion of the offering and there can be no assurance that the training or racing of one or more of our horses will not be so impaired. In particular, on September 24, 2011, one of our horses, the filly by Macho Uno out of Dashes N Dots (identified as Horse 2 in 'Business—Horse Acquisitions—Our Thoroughbred Racehorses' below), injured its foot and underwent surgery related to this injury but has now commenced the training process."

Flickr photo, "Horse Races @ Gulfstream Park," by Revo_1599.

My Favorite Risk Factors in the Yelp S-1

Yelp filed a registration statement  yesterday.

The disclosure will be revised before a final prospectus hits the street, but here are my favorite risk factors from this initial filing.

  1. "Google . . . is the most significant source of traffic to our website accounting for more than half of the visits to our website from Internet searches during the nine months ended September 30, 2011. Our success depends on our ability to maintain a prominent presence in search results for queries regarding local businesses on Google. Google has removed links to our website from portions of its web search product, and has promoted its own competing products, including Google’s local products, in its search results."
  2. "[U]sers who contribute content to our platform may provide content to our competitors or subsequently remove their content from our platform. If they do so, the value of our content may decline relative to other available products and services, and our business may be harmed."
  3. "The media has previously reported allegations that we manipulate our reviews, rankings and ratings in favor of our advertisers and against non-advertisers. Our reputation and brand, the traffic to our website and mobile app, and our business may suffer if these allegations persist or if users otherwise perceive that content on our website and mobile app is manipulated or biased."
  4. "In the nine months ended September 30, 2011, substantially all of our revenue was generated by the sale of advertising products."
  5. "Because we do not currently deliver advertising on our mobile app, we have not materially monetized our mobile app to date. If consumers use our mobile app at the expense of our website, our advertisers may stop or reduce advertising on our website, and they may be unable to advertise on our mobile app unless we develop effective mobile advertising solutions that are compelling to them."
  6. "From time to time, other companies copy information from our platform, through website scraping, robots or other means, and publish or aggregate it with other information for their own benefit. For example, in parts of 2010 and 2011, Google incorporated content from our website into its own local product without our permission. Google’s users, as a result, may not have visited our website because they found the information they sought on Google. Our Chief Executive Officer recently testified before the U.S. Senate Committee on the Judiciary, Subcommittee on Antitrust, Competition Policy and Consumer Rights regarding Google’s practices in this regard. While we do not believe that Google is still incorporating our content within its local products, we have no assurance that Google or other companies will not copy, publish or aggregate content from our platform in the future."
  7. "We recently implemented a disaster recovery program, which allows us to move our platform to a back-up data center in the event of a catastrophe. Although this program is functional, it does not yet provide a real time back-up data center, so if our primary data center shuts down, there will be a period of time that our platform will remain unavailable while the transition to the back-up data center takes place."
  8. "We currently face, and we expect to face from time to time in the future, allegations that we have violated the rights of third parties, including patent, trademark, copyright and other intellectual property rights. For example, third parties have sued us for allegedly violating their patent rights (we are currently a defendant in seven such suits, all of which involve plaintiffs targeting multiple defendants in the same or similar suits), an action was filed against us on behalf of current and former employees claiming that we violated labor and other laws (we have agreed in principle, subject to court approval, to settle the suit for up to $1.3 million) and various businesses have sued us alleging that we manipulate Yelp reviews in order to coerce them and other businesses to pay for Yelp advertising (one such suit was voluntarily dismissed, and two others were consolidated and recently dismissed with prejudice, although the plaintiffs are seeking an appeal)."
  9. "We use open source software in our solutions and will use open source software in the future. From time to time, we may face claims from third parties claiming ownership of, or demanding release of, the open source software and/or derivative works that we developed using such software (which could include our proprietary source code), or otherwise seeking to enforce the terms of the applicable open source license. These claims could result in litigation and could require us to purchase a costly license or cease offering the implicated solutions unless and until we can re-engineer them to avoid infringement."
  10. "While, prior to this offering, our shares have not been listed on any stock exchange or other public trading market, there has been some trading of our securities, for instance, in private trades or trades on alternative online markets, such as SecondMarket and SharesPost, that exist for privately traded securities. These markets are speculative, and the trading price of our securities on these markets is privately negotiated. We cannot assure you that the price of our Class A common stock will equal or exceed the price at which our securities have traded on these private secondary markets."
  11. "As a result of becoming a public company, we will be obligated to develop and maintain proper and effective internal controls over financial reporting."

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