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Hibbett Sports (HIBB)
NASDAQ:HIBB
Risk Overview Q2, 2024
Risk Distribution
34% Finance & Corporate
22% Production
16% Ability to Sell
13% Tech & Innovation
13% Legal & Regulatory
3% Macro & Political
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
This chart displays the stock's most recent risk distribution according to category. TipRanks has identified 6 major categories: Finance & corporate, legal & regulatory, macro & political, production, tech & innovation, and ability to sell.
Risk Change Over Time
S&P500 Average
Sector Average
Risks removed
Risks added
Risks changed
Hibbett Sports Risk Factors
New Risk (0)
Risk Changed (0)
Risk Removed (0)
No changes from previous report
The chart shows the number of risks a company has disclosed. You can compare this to the sector average or S&P 500 average.
The quarters shown in the chart are according to the calendar year (January to December). Businesses set their own financial calendar, known as a fiscal year. For example, Walmart ends their financial year at the end of January to accommodate the holiday season.
The quarters shown in the chart are according to the calendar year (January to December). Businesses set their own financial calendar, known as a fiscal year. For example, Walmart ends their financial year at the end of January to accommodate the holiday season.
Risk Highlights Q2, 2024
Main Risk Category
Finance & Corporate
With 11 Risks
Finance & Corporate
With 11 Risks
Number of Disclosed Risks
32
+7
From last reportS&P 500 Average: 32
32
+7
From last reportS&P 500 Average: 32
Recent Changes
7Risks added
0Risks removed
0Risks changed
Since May 2024
7Risks added
0Risks removed
0Risks changed
Since May 2024
Number of Risk Changed
0
-5
From last reportS&P 500 Average: 4
0
-5
From last reportS&P 500 Average: 4
See the risk highlights of Hibbett Sports in the last period.
Risk Word Cloud
The most common phrases about risk factors from the most recent report. Larger texts indicate more widely used phrases.
Risk Factors Full Breakdown - Total Risks 32
Finance & Corporate
Total Risks: 11/32 (34%)Above Sector Average
Share Price & Shareholder Rights4 | 12.5%
Share Price & Shareholder Rights - Risk 1
Actions of activist stockholders or other parties may impair our ability to consummate the Merger or otherwise negatively impact our business.Added
Share Price & Shareholder Rights - Risk 2
The market price of our Common Stock may be volatile and ownership of our Common Stock comes with inherent risks.The market price of our common stock has been and is likely to continue to be highly volatile, and such volatility could expose us to securities class action litigation. Factors that could cause fluctuations in the price of our common stock may include, among other things, actual or anticipated variations in quarterly operating results; changes in financial estimates by investment analysts and our inability to meet or exceed those estimates; additions or departures of key personnel; market rumors or announcements by us or by our competitors of significant acquisitions, divestitures or joint ventures, strategic partnerships, large capital commitments or other strategic initiatives; changes in retail sales data that indicate consumers may spend less on discretionary purchases; and sales of our common stock by key personnel or large institutional holders.
Many of these factors are beyond our control and may cause the market price of our common stock to decline, regardless of our operating performance.
Share Price & Shareholder Rights - Risk 3
There can be no assurance that we will continue to repurchase our common stock or that we will repurchase our common stock at favorable prices.In May 2021, our Board of Directors authorized the expansion of our Repurchase Program by $500.0 million to a total of $800.0 million, as well as its extending the Repurchase Program to February 1, 2025. Repurchases may be made from time to time in the open market (including, without limitation, through the use of Rule 10b5-1 plans), depending on a number of factors, including our evaluation of general market and economic conditions, our financial condition and the trading price of our common stock. The Repurchase Program may be extended, modified, suspended or discontinued at any time. We expect to fund the Repurchase Program with existing cash on hand, cash generated from operations, and/or borrowings under our credit facility then in effect. A reduction in, or the completion or expiration of, our Repurchase Program could have a negative effect on our stock price. We can provide no assurance that we will repurchase our common stock at favorable prices, or at all.
In 2022, President Biden signed into law the Inflation Reduction Act of 2022 (Inflation Reduction Act). The Inflation Reduction Act imposes on a publicly-traded corporation a new, nondeductible excise tax equal to 1% of the fair market value of any stock of the corporation that is repurchased after December 31, 2022 by the corporation during its taxable year. Because this excise tax would be payable by us, and not by a redeeming holder, the imposition of this excise tax could cause a reduction in the cash available on hand to implement the Repurchase Program.
Share Price & Shareholder Rights - Risk 4
Provisions in our charter documents and Delaware law might deter acquisition bids for us.Certain provisions of our certificate of incorporation and bylaws may be deemed to have anti-takeover effects and may discourage, delay or prevent a takeover attempt that a stockholder might consider in its best interest. These provisions, among other things:
- classify our Board of Directors into three classes, each of which serves for different three-year periods;- provide that a director may be removed by stockholders only for cause by a vote of the holders of not less than a majority of our shares entitled to vote;- provide that all vacancies on our Board of Directors, including any vacancies resulting from an increase in the number of directors, may be filled by a majority of the remaining directors, even if the number is less than a quorum; and - call for a vote of the holders of not less than two-thirds of the shares entitled to vote in order to amend the foregoing provisions and certain other provisions of our certificate of incorporation and bylaws.
In addition, our Board of Directors, without further action of the stockholders, is permitted to issue and fix the terms of preferred stock, which may have rights senior to those of common stock. We are also subject to the Delaware business combination statute, which may render a change in control of us more difficult. Section 203 of the Delaware General Corporation Law would be expected to have an anti-takeover effect with respect to transactions not approved in advance by the Board of Directors, including discouraging takeover attempts that might result in a premium over the market price for the shares of common stock held by stockholders.
Accounting & Financial Operations2 | 6.3%
Accounting & Financial Operations - Risk 1
We currently pay a quarterly cash dividend, however, there can be no assurance as to the declaration or amount of future dividends.Accounting & Financial Operations - Risk 2
Our operating results are subject to seasonal and quarterly fluctuations. Furthermore, our quarterly operating results, including comparable store net sales, will fluctuate and may not be a meaningful indicator of future performance.We experience seasonal fluctuations in our net sales and results of operations. We typically experience higher net sales in early spring due to spring sports and annual tax refunds, late summer due to back-to-school shopping and winter due to holiday shopping. Adverse events outside of our control, such as supply chain interruptions, increased labor costs and labor availability, decreased consumer traffic as a result of widespread public health events or pandemics, including COVID-19, geopolitical conflicts or otherwise or deteriorating economic conditions could result in lower than expected sales during the holiday season or other periods in which we typically experience higher net sales and have and could in the future materially impact our financial condition and results of operations. In addition, our quarterly results of operations may fluctuate significantly as a result of a variety of factors, including the timing of new store openings, the amount and timing of net sales contributed by new stores, weather fluctuations, merchandise mix, demand for merchandise driven by local interest in sporting events and the timing of sales tax holidays and annual tax refunds. Any of these events, particularly in the fourth quarter or other periods in which we typically experience higher net sales, could have a material adverse effect on our business, financial condition and operating results for the entire fiscal year.
Comparable store net sales vary from quarter to quarter, and an unanticipated decline in comparable store net sales may cause the price of our common stock to fluctuate significantly. Factors that could affect our comparable store net sales results include shifts in consumer tastes and fashion trends; calendar shifts of holiday or seasonal periods; the timing of income tax refunds to customers; increases in personal income taxes paid by our customers; calendar shifts or cancellations of sales tax-free holidays in certain states; the success or failure of college and professional sports teams or the cancellation of sporting events within our core regions; changes in or lack of tenants in the shopping centers in which we are located; pricing, promotions or other actions taken by us or our existing or possible new competitors; unseasonable weather conditions or natural disasters; political or social unrest; and reduced consumer traffic due to widespread public health events or pandemics, including COVID-19.
We cannot assure you that comparable store net sales will increase at the rates achieved in prior periods or that rates will not decline.
Debt & Financing1 | 3.1%
Debt & Financing - Risk 1
Indebtedness that we may incur in the future could adversely affect our financial condition, limit our ability to obtain additional financing, restrict our operations and make us more vulnerable to economic downturns and competitive pressures. In addition, we face risk that our financial institution may fail to fulfill commitments under our 2023 Credit Facility.Corporate Activity and Growth4 | 12.5%
Corporate Activity and Growth - Risk 1
The Merger may not be completed within the expected timeframe, or at all, and significant delay or the failure to complete the Merger could adversely affect our business.Added
Corporate Activity and Growth - Risk 2
The Merger Agreement contains provisions that could make it difficult for a third party to make a superior acquisition proposal.Added
The Merger Agreement contains certain customary restrictions on our ability to solicit proposals from third parties for an acquisition of the Company during the pendency of the Merger. In addition, subject to certain customary "fiduciary out" exceptions, the Board is required to recommend that our stockholders vote in favor of the approval of the Merger, the Merger Agreement and the transactions contemplated thereby.
As discussed in further detail above under the heading "If the Merger Agreement is terminated, under certain conditions, we may be obligated to pay Parent a substantial termination fee, which could require us to incur additional debt or reduce the amount of cash we have available to fund our operations," we would also be required to pay Parent the Company Termination Fee under certain conditions in connection with the termination of the Merger Agreement.
These provisions might discourage an otherwise-interested third party from considering or proposing an acquisition of the Company, including proposals that may be deemed to offer greater value to our stockholders than the transaction consideration of $87.50 per share. Furthermore, even if a third party elects to propose an acquisition, the requirement that we must pay a termination fee to accept any such proposal may cause that third party to offer a lower price to our stockholders than such third party might have otherwise offered.
Corporate Activity and Growth - Risk 3
The Merger Agreement and the pendency or failure of the Merger could have a material adverse effect on our business, results of operations, financial condition and stock price.Added
On April 23, 2024, we entered into a Merger Agreement by and among the Company, Genesis Holdings, Inc., an Indiana corporation ("Parent"), Steps Merger Sub, Inc., a wholly owned subsidiary of Parent ("Merger Sub"), and, solely for purposes of certain provisions specified therein, JD Sports Fashion plc, a company incorporated under the laws of England and Wales and the ultimate parent company of Parent and Merger Sub ("JD Sports"). Pursuant to the terms of the Merger Agreement and subject to the satisfaction or waiver of various customary conditions set forth in the Merger Agreement, including, but not limited to, the approval of the Merger Agreement by the affirmative vote of the holders of a majority of the issued and outstanding shares of our common stock (the "Company Stockholder Approval"), Merger Sub will be merged with and into the Company (the "Merger") effective as of the effective time of the Merger.
During the period between the execution of the Merger Agreement and the closing of the Merger, our business is exposed to certain inherent risks due to the effect of the announcement or pendency of the Merger and the transactions contemplated by the Merger, which may impact our business relationships, financial condition and operating results. Some of these risks include:
- difficulties maintaining relationships with vendors, suppliers, landlords, service providers, customers and other business partners, who may defer decisions about working with us, move to our competitors, seek to delay or change existing relationships with us;- uncertainties caused by negative sentiment in the marketplace with respect to the Merger, which could adversely impact investor confidence in the Company;- distraction of our current employees as a result of the Merger which could result in a decline in their productivity or cause distractions in the workplace;- our inability to attract new employees or retain current employees due to uncertainties related to the Merger;- diversion of significant management time and resources towards the completion of the Merger and transactions related to the Merger;- impact of costs related to completion of the Merger and transactions related to the Merger, including costs related to any divestitures required to obtain regulatory approvals;- our inability to solicit other acquisition proposals, pursue alternative business opportunities, make strategic changes to our business and other restrictions on our ability to conduct our business under the Merger Agreement; and - other developments beyond our control, including, but not limited to, changes in domestic or global economic conditions that may affect the timing or success of the Merger.
Corporate Activity and Growth - Risk 4
If the Merger Agreement is terminated, under certain conditions, we may be obligated to pay Parent a substantial termination fee, which could require us to incur additional debt or reduce the amount of cash we have available to fund our operations.Added
Under the Merger Agreement, prior to obtaining the Company Stockholder Approval, we may terminate the Merger Agreement in order to concurrently enter into a definitive agreement providing for a Company Superior Proposal (as defined in the Merger Agreement) (after compliance in all material respects with applicable terms of the Merger Agreement); provided, that immediately prior to or concurrently with (and as a condition to) such termination, we pay to Parent a termination fee of an amount in cash equal to $35.2 million (the "Company Termination Fee").
Further, Parent may terminate the Merger Agreement, and receive the Company Termination Fee from us, if (i) a Company Adverse Recommendation Change (as defined in the Merger Agreement) has occurred prior to obtaining the Company Stockholder Approval or (ii) we have committed a Willful and Material Breach (as defined in the Merger Agreement) of the covenant prohibiting solicitation of Company Takeover Proposals (as defined in the Merger Agreement).
We will also be required to pay the Company Termination Fee if (A) a third party publicly proposes or announces a Company Takeover Proposal after the date of the Merger Agreement and such Company Takeover Proposal is not withdrawn prior to a termination of the Merger Agreement (and, in the case of a termination if the Company Stockholder Approval has not been obtained upon a vote taken thereon at the Stockholder Meeting (as defined in the Merger Agreement) or at any adjournment or postponement thereof, at least one business day before such vote is taken), and thereafter the Merger Agreement is terminated by (i) either us or Parent as a result of the Merger not having been consummated on or prior to the End Date (as defined in the Merger Agreement) (and, in the case of such termination, the Parent Termination Fee (as defined in the Merger Agreement) is not payable), (ii) Parent as a result of a breach or failure to perform by us of any representation, warranty, covenant or other agreement under the Merger Agreement which breach or failure to perform would result in a failure of a condition to the obligations of Parent to effect the Merger to be satisfied, subject to certain limitations set forth in the Merger Agreement or (iii) Parent or us as a result of our failing to obtain the Company Stockholder Approval upon a vote taken thereon at the Stockholder Meeting or any adjournment or postponement thereof; and (B) at any time within the 12 months following such termination, we or any of our subsidiaries consummate any transaction included within the definition of a Company Takeover Proposal or enter into a definitive agreement for any such transaction that is (i) subsequently consummated or (ii) subsequently terminated before consummation but a subsequent such transaction is entered into in connection with the termination of such first transaction and such subsequent transaction is subsequently consummated (in either case, whether within such 12-month period or thereafter).
If we are required to pay the Company Termination Fee, we may be required to incur additional debt or use funds that we would otherwise have been able to use for general corporate expenses, capital expenditures or for other purposes.
Production
Total Risks: 7/32 (22%)Above Sector Average
Manufacturing1 | 3.1%
Manufacturing - Risk 1
We would be materially and adversely affected if all or a portion of our wholesale and logistics facility was disrupted.Employment / Personnel3 | 9.4%
Employment / Personnel - Risk 1
We depend on key personnel, the loss of which may adversely affect our ability to run our business effectively and our results of operations.Employment / Personnel - Risk 2
We cannot be assured that we will not experience pressure from labor unions or become the target of labor union campaigns.While we believe we maintain good relations with our employees, we cannot provide any assurances that we will not experience pressure from labor unions or become the target of labor union campaigns. The potential for unionization could increase in the United States if federal legislation or regulatory changes are adopted that would facilitate labor organization. Significant union representation would require us to negotiate wages, salaries, benefits and other terms with many of our employees collectively and could adversely affect our results of operations by increasing our labor costs or otherwise restricting our ability to maximize the efficiency of our operations.
Employment / Personnel - Risk 3
We may face difficulties in meeting our labor needs to effectively operate our business.We are heavily dependent upon our labor workforce in the geographic areas where we conduct our business. Our compensation packages are designed to provide benefits commensurate with our level of expected service. However, within our retail and logistics operations, we face the challenge of filling many positions at wage scales that are appropriate to the industry and other competitive factors. Many of our team members in our stores are in entry-level or part-time positions that historically have high rates of turnover. We are also dependent on the team members who staff our wholesale and logistics facility, many of whom are skilled. Recent inflationary pressures and shortages of skilled and entry-level employees have increased our labor costs, and there is the risk that prevailing wage rates for our labor workforce will continue to increase in the future and that the costs of employee benefits will continue to rise, resulting in increased expenses that could adversely affect our profitability. We also face other risks in meeting our labor needs, including competition for qualified personnel, overall unemployment and underemployment levels, demand for certain labor expertise, changing demographics, health and other insurance costs, adoption of new or revised employment and labor laws and regulations, and the impact of public health issues (including impacts related to COVID-19) or natural disasters or severe weather events (including due to climate change). Changes in any of these factors, including a shortage of available workforce in areas in which we operate, could interfere with our ability to adequately service our customers or to open suitable locations and could result in increasing labor costs.
Supply Chain1 | 3.1%
Supply Chain - Risk 1
We depend on our vendors to provide us with sufficient quantities of quality products in a timely and cost-effective fashion. If we lose any of our key vendors or any of our key vendors fail to supply us with quality brand name merchandise at competitive prices, we may not be able to meet the demand of our customers and our net sales and profitability could decline.Costs2 | 6.3%
Costs - Risk 1
A disruption in the flow of imported merchandise or an increase in the cost of those goods could significantly decrease our net sales and operating income.Costs - Risk 2
Increases in transportation or shipping costs and other factors may negatively impact our results of operations.We rely upon various means of transportation, including ship and truck, to deliver products to our wholesale and logistics facility, our stores and our customers. Consequently, our results can vary depending upon the cost and availability of transportation, which has been impacted by the price of fuel and labor and other distribution challenges.
The price of oil has fluctuated significantly over the last few years, and any increases in fuel costs, whether as a result of inflation or other macroeconomic factors, geopolitical conflicts or otherwise, would increase our transportation costs.
In addition, general labor shortages or strikes in the transportation or shipping industries could negatively affect transportation and shipping costs and our ability to supply our stores in a timely manner. Product delivery could also be subject to disruption due to raw material shortages, political unrest, oceanic shipping, port labor issues, international disputes, geopolitical conflicts, natural disasters, widespread public health events or pandemics, including COVID-19, or terrorism. We rely on efficient and effective operations within our wholesale and logistics facility to ensure accurate product delivery to our stores. Failure to maintain such operations could adversely affect net sales.
Ability to Sell
Total Risks: 5/32 (16%)Above Sector Average
Competition1 | 3.1%
Competition - Risk 1
Pressure from our competitors may force us to reduce our prices or increase our spending on marketing and promotion, which could lower our net sales, gross profit and operating income.Demand1 | 3.1%
Demand - Risk 1
The industry in which we operate is dependent upon fashion trends, customer preferences, product innovations and other fashion-related factors. Our inability to anticipate and respond quickly to changing customer preferences could reduce our net sales or profitability.Sales & Marketing2 | 6.3%
Sales & Marketing - Risk 1
If we are unable to provide a relevant and reliable experience for our customers across multiple channels that is comparable to our competitors, we may not be able to compete effectively, and our sales, profitability and reputation may be adversely affected.Sales & Marketing - Risk 2
We are subject to payment-related risks that could increase our operating costs, subject us to potential liability, and potentially disrupt our business.We collect customer data, including encrypted and tokenized credit card information, in our stores and online. For our sales channels to function successfully, we and third parties involved in processing customer transactions for us must be able to transmit confidential information, including credit card information, securely over public networks. While we have measures in place designed to prevent a breach or unauthorized use or disclosure of customer data and other sensitive personal information, we cannot guarantee that any of our security measures or the security measures of third parties with whom we work will effectively prevent others from obtaining unauthorized access to our customers' information or other personally identifiable information. As a retailer accepting debit and credit cards for payment, we are subject to various industry data protection standards and protocols, such as payment network security operating guidelines and the Payment Card Industry Data Security Standard. We cannot be certain that the security measures we maintain to protect all of our information technology systems are able to prevent, contain or detect cyberattacks, cyberterrorism, security breaches or other compromises from known malware or ransomware or other threats that may be developed in the future. If someone is able to circumvent our data security measures or those of third parties with whom we do business, they could destroy or steal valuable information or disrupt our operations. If such a breach were to occur, customers could lose confidence in our ability to secure their information and choose not to purchase from us. Any unauthorized use of or access to customer information could expose us to data loss or manipulation, litigation and legal liability, and could seriously disrupt operations, negatively impact our marketing capabilities, cause us to incur significant expenses to notify customers of the breach and for other remediation activities, and harm our reputation and brand, any of which could adversely affect our financial condition and results of operations.
In addition, state, federal, and foreign governments are increasingly enacting laws and regulations to protect consumers against identity theft and consumer privacy, which may apply specifically to, or include, payment-related information. Many of these laws and regulations are subject to uncertain application, interpretation or enforcement standards that could result in claims, changes to our business practices, data processing and security systems, penalties, increased operation costs or other impacts on our business. These laws and regulations will likely increase the costs of doing business, and if we fail to implement appropriate procedures, security measures, or detect and provide prompt notice of unauthorized access as required by some of these laws and regulations, we could be subject to potential claims for damages and other remedies, government enforcement actions, liability for monetary damages, fines and/or criminal prosecution, all of which could adversely affect our business and results of operations.
Brand / Reputation1 | 3.1%
Brand / Reputation - Risk 1
Our business could be negatively impacted by the public perception of our corporate ESG initiatives and efforts.Tech & Innovation
Total Risks: 4/32 (13%)Above Sector Average
Trade Secrets1 | 3.1%
Trade Secrets - Risk 1
Our inability or failure to protect our intellectual property rights, or any claimed infringement by us of third-party intellectual rights, could have a negative impact on our operating results.Cyber Security1 | 3.1%
Cyber Security - Risk 1
Security threats, including physical and cybersecurity threats, and unauthorized disclosure of sensitive or confidential information could cause us to incur substantial expenses, result in litigation or other legal actions, adversely affect our operating results, and harm our business and reputation with consumers.Technology2 | 6.3%
Technology - Risk 1
Problems with our information systems could disrupt our operations and negatively impact our financial results and materially adversely affect our business operations. If services we obtain from third parties are unavailable, disrupted, or fail to meet our standards and expectations, our operations could be adversely affected.Technology - Risk 2
Emerging technologies may create disruption to the retail industry.New and emerging technologies may enable new approaches or choices for how our customers procure goods and services and pay for those goods and services. We may be unable to quickly adapt to rapid change resulting from advancements in artificial intelligence, blockchain and cryptocurrency, Internet of Things (IoT), including voice and smart home devices, metaverse and other advanced technologies that may result in changes to our supply chain, distribution channels and point-of-sale capabilities.
Legal & Regulatory
Total Risks: 4/32 (13%)Above Sector Average
Regulation2 | 6.3%
Regulation - Risk 1
Changes in federal, state or local laws could increase our expenses and expose us to legal risks. Failure to comply with federal, state or local laws could materially adversely affect our reputation and market position and subject us to legal claims and litigation, cause us to incur substantial additional costs, and materially affect our business and operating results.Regulation - Risk 2
Pursuant to the Merger Agreement, we are subject to certain restrictions on our business activities.Added
During the period from the date of the Merger Agreement until the earlier of the Effective Time and the termination of the Merger Agreement, we are generally required to conduct our business in the ordinary course consistent with past practice.
However, we are restricted from taking certain actions without JD Sports prior consent, which is not to be unreasonably withheld, conditioned or delayed. These limitations include, among other things, certain restrictions on our ability to amend our organizational documents, acquire other businesses and assets, dispose of our assets, make investments, repurchase our common stock, pay dividends, incur indebtedness, issue stock-based awards, amend or change certain compensation arrangements, enter into, amend or terminate certain contracts, initiate or settle certain litigation, or change tax classifications and elections. Such restrictions could prevent us from pursuing strategic business opportunities, limit our ability to respond effectively and timely to competitive pressures, industry developments, economic conditions and future opportunities, and otherwise have an adverse effect on our business, results of operations and financial condition.
Litigation & Legal Liabilities1 | 3.1%
Litigation & Legal Liabilities - Risk 1
Litigation related to the Merger could prevent or delay the completion of the Merger or otherwise negatively affect our business and operations.Added
Environmental / Social1 | 3.1%
Environmental / Social - Risk 1
Global climate change and related regulations could negatively affect our business.Macro & Political
Total Risks: 1/32 (3%)Above Sector Average
Economy & Political Environment1 | 3.1%
Economy & Political Environment - Risk 1
Disruptions in the economy and in financial markets, inflationary pressures and increasing interest rates could adversely affect consumer purchases of discretionary items, which could reduce our net sales and adversely affect our business, results of operations, liquidity, cash flows and financial condition.See a full breakdown of risk according to category and subcategory. The list starts with the category with the most risk. Click on subcategories to read relevant extracts from the most recent report.
FAQ
What are “Risk Factors”?
Risk factors are any situations or occurrences that could make investing in a company risky.
The Securities and Exchange Commission (SEC) requires that publicly traded companies disclose their most significant risk factors. This is so that potential investors can consider any risks before they make an investment.
They also offer companies protection, as a company can use risk factors as liability protection. This could happen if a company underperforms and investors take legal action as a result.
It is worth noting that smaller companies, that is those with a public float of under $75 million on the last business day, do not have to include risk factors in their 10-K and 10-Q forms, although some may choose to do so.
How do companies disclose their risk factors?
Publicly traded companies initially disclose their risk factors to the SEC through their S-1 filings as part of the IPO process.
Additionally, companies must provide a complete list of risk factors in their Annual Reports (Form 10-K) or (Form 20-F) for “foreign private issuers”.
Quarterly Reports also include a section on risk factors (Form 10-Q) where companies are only required to update any changes since the previous report.
According to the SEC, risk factors should be reported concisely, logically and in “plain English” so investors can understand them.
How can I use TipRanks risk factors in my stock research?
Use the Risk Factors tab to get data about the risk factors of any company in which you are considering investing.
You can easily see the most significant risks a company is facing. Additionally, you can find out which risk factors a company has added, removed or adjusted since its previous disclosure. You can also see how a company’s risk factors compare to others in its sector.
Without reading company reports or participating in conference calls, you would most likely not have access to this sort of information, which is usually not included in press releases or other public announcements.
A simplified analysis of risk factors is unique to TipRanks.
What are all the risk factor categories?
TipRanks has identified 6 major categories of risk factors and a number of subcategories for each. You can see how these categories are broken down in the list below.
1. Financial & Corporate
- Accounting & Financial Operations - risks related to accounting loss, value of intangible assets, financial statements, value of intangible assets, financial reporting, estimates, guidance, company profitability, dividends, fluctuating results.
- Share Price & Shareholder Rights – risks related to things that impact share prices and the rights of shareholders, including analyst ratings, major shareholder activity, trade volatility, liquidity of shares, anti-takeover provisions, international listing, dual listing.
- Debt & Financing – risks related to debt, funding, financing and interest rates, financial investments.
- Corporate Activity and Growth – risks related to restructuring, M&As, joint ventures, execution of corporate strategy, strategic alliances.
2. Legal & Regulatory
- Litigation and Legal Liabilities – risks related to litigation/ lawsuits against the company.
- Regulation – risks related to compliance, GDPR, and new legislation.
- Environmental / Social – risks related to environmental regulation and to data privacy.
- Taxation & Government Incentives – risks related to taxation and changes in government incentives.
3. Production
- Costs – risks related to costs of production including commodity prices, future contracts, inventory.
- Supply Chain – risks related to the company’s suppliers.
- Manufacturing – risks related to the company’s manufacturing process including product quality and product recalls.
- Human Capital – risks related to recruitment, training and retention of key employees, employee relationships & unions labor disputes, pension, and post retirement benefits, medical, health and welfare benefits, employee misconduct, employee litigation.
4. Technology & Innovation
- Innovation / R&D – risks related to innovation and new product development.
- Technology – risks related to the company’s reliance on technology.
- Cyber Security – risks related to securing the company’s digital assets and from cyber attacks.
- Trade Secrets & Patents – risks related to the company’s ability to protect its intellectual property and to infringement claims against the company as well as piracy and unlicensed copying.
5. Ability to Sell
- Demand – risks related to the demand of the company’s goods and services including seasonality, reliance on key customers.
- Competition – risks related to the company’s competition including substitutes.
- Sales & Marketing – risks related to sales, marketing, and distribution channels, pricing, and market penetration.
- Brand & Reputation – risks related to the company’s brand and reputation.
6. Macro & Political
- Economy & Political Environment – risks related to changes in economic and political conditions.
- Natural and Human Disruptions – risks related to catastrophes, floods, storms, terror, earthquakes, coronavirus pandemic/COVID-19.
- International Operations – risks related to the global nature of the company.
- Capital Markets – risks related to exchange rates and trade, cryptocurrency.