Cloudflare (8CF) Risk Analysis
Risk Overview Q2, 2026
Source: the company's latest filing for the period ended Jun 30, 2026, filed Aug 06, 2026
Risk Change Over Time
- Share Price & Shareholder Rights - Risk 1If the Capitalization Changes are implemented, it will affect the relative voting power of our outstanding shares of capital stock.
As described in the proxy statement in connection with our annual meeting of stockholders that occurred in June 2026 (the 2026 Annual Meeting), we intend to implement the Capitalization Changes, which are comprised of (a) the adoption of an amendment to our amended and restated certificate of incorporation authorizing a new class of non-voting common stock (our Class C common stock), (b) the designation of a new series of our preferred stock as Series FF preferred stock (our Series FF preferred stock) with the powers, preferences and rights, and the qualifications, limitations, or restrictions set forth in the Certificate of Designations of Series FF preferred stock, (the Certificate of Designations), (c) entry into an Exchange Agreement, pursuant to which substantially all of the shares of Class B common stock held by our co-founders and certain of their related entities would be exchanged for (i) an equivalent number of shares of Series FF preferred stock and (ii) an equivalent number of shares of Class A common stock (collectively, the Preferred Exchange), and (d) upon the effectiveness of the amended and restated certificate of incorporation (x) each share of Class A common stock issued and outstanding or held as treasury stock immediately prior to the effectiveness of the amended and restated certificate of incorporation, automatically and without further action by us or any stockholder, would be reconstituted and become one share of Class A common stock and one share of Class C common stock; and (y) each share of Class B common stock issued and outstanding or held as treasury stock immediately prior to the effectiveness of the amended and restated certificate of incorporation, automatically and without further action by us or any stockholder, would be reconstituted and become one share of Class B common stock and one share of Class C common stock ((x) and (y), collectively, the Class C Split). At the 2026 Annual Meeting, our stockholders approved the elements of the Capitalization Changes that required stockholder approval. Subject to the litigation related to the Capitalization Changes described below, we anticipate implementing the Capitalization Changes as early as September 2026. If the Capitalization Changes occur, there will be no effect on the proportionate economic interest of any stockholder. However, if the Capitalization Changes occur, (i) our co-founders and their affiliates would experience a de minimis reduction in the number of votes they are able to cast but no change in their relative voting power as a proportion of the voting power of all outstanding shares of our capital stock, (ii) as a result of the automatic conversion of all remaining shares of Class B common stock into shares of Class A common stock, the holders of Class B common stock prior to the Capitalization Changes (other than our co-founders) would experience a reduction in the number of votes they are able to cast and their relative voting power as a proportion of the voting power of all outstanding shares of our capital stock, and (iii) holders of Class A common stock would experience no change in the number of votes they are able to cast but a de minimis increase in their relative voting power as a proportion of the voting power of all outstanding shares of our capital stock. Following the Capitalization Changes, stockholders who sell their shares of Class C common stock will not lose any voting power, but their relative equity interest in us will decrease as a result of such sale. Conversely, stockholders who purchase shares of Class C common stock after the Capitalization Changes will increase their relative equity interest in us but will not gain any additional voting power or have any voting power at all if they do not otherwise own shares of Class A common stock or Series FF preferred stock.
- Share Price & Shareholder Rights - Risk 2If the Class C Split occurs, it would affect the market price of our outstanding shares of Class A common stock and Class C common stock.
If the Class C Split occurs, we believe that the market price for the shares of our Class A common stock will generally reflect the effect of a two-for-one stock split and, accordingly, the market price of the Class A common stock will decrease by approximately one-half. Assuming that the Class C Split occurs, we expect the market price of shares of Class C common stock to be approximately equal to the market price of shares of Class A common stock, as that market price adjusts as a result of the Class C Split. The trading prices for shares of Class A common stock and Class C common stock may be affected by the relative voting rights between these two classes of stock. Because the Class A common stock carries voting rights, it is possible that it could trade at a premium compared to the Class C common stock. This is particularly true if investors were to place a premium on owning our shares that have voting rights, as opposed to shares without voting rights. Furthermore, the trading price of shares of Class A common stock and Class C common stock would continue to depend on many factors, including our future performance, the relative trading liquidity of the Class A common stock and the Class C common stock, general market conditions, and conditions relating to companies in businesses and industries similar to us. Accordingly, we cannot predict the prices at which shares of Class A common stock and Class C common stock would trade following the Class C Split, just as we could not predict the price at which shares of Class A common stock would trade absent the Class C Split. Following the Capitalization Changes, there will continue not to be any trading market for our Class B common stock and there will not be a trading market for our Series FF preferred stock.
- Share Price & Shareholder Rights - Risk 3Any issuance of additional shares of Class C common stock by us or dispositions of shares of Class C common stock by significant or other stockholders may serve to further increase market activity in the shares of Class C common stock relative to the shares of Class A common stock.
Following implementation of the Capitalization Changes, in order to minimize dilution of voting power to existing stockholders, we are more likely to issue shares of Class C common stock than shares of Class A common stock in the future to further strategic initiatives (such as the acquisition of complementary businesses and raising funds from equity or equity-linked financing transactions), or issue equity awards to our employees, directors, and other service providers. Following the Class C Split, some of our stockholders may sell their shares of Class C common stock but retain their shares of Class A common stock or Series FF preferred stock in order to monetize a portion of their investment in us while retaining their relative voting power. Any such issuance of additional shares of Class C common stock by us or dispositions of shares of Class C common stock by our stockholders may serve to further increase market activity in the shares of Class C common stock relative to the shares of Class A common stock.
- Share Price & Shareholder Rights - Risk 4The Class C common stock may not be as attractive as our Class A common stock for financings, acquisition currency, or equity incentives.
Following the Class C Split, we expect to utilize the Class C common stock as currency for equity incentives for our service providers, for equity and equity-linked financing transactions, and, to the extent we engage in M&A transactions involving stock consideration, as the stock component of the consideration in those transactions. It is possible that potential financing sources, counterparties and/or employees and directors will view nonvoting Class C common stock negatively as compared to the voting Class A common stock, particularly if the nonvoting Class C common stock trades at a discount to the voting Class A common stock. In these circumstances, it may be more difficult to use the nonvoting Class C common stock as a source for obtaining financing, as consideration for potential acquisition targets or as incentive compensation to hire or retain employees and directors. In that scenario, we may consider using shares of Class A common stock for those purposes, which will dilute the aggregate voting power of its stockholders (including our co-founders), or, in the case of our employees, provide other incentives to compensate them.
- Share Price & Shareholder Rights - Risk 5A liquid trading market for our Class C common stock may not develop and/or our Class C common stock may trade at a discount to our Class A common stock.
The Class C Split would result in each current holder of Class A common stock holding half of its existing economic interest in Class A common stock and half of its existing economic interest in Class C common stock. Following the Class C Split, we expect the Class C common stock to trade in a sufficiently liquid market and for the Class C common stock to trade at a minimal or zero discount to the Class A common stock. However, it is possible that this liquid market will not develop and that the Class C common stock could trade at a more meaningful discount to the Class A common stock.
- Corporate Activity and Growth - Risk 6The ongoing evolution of our business to an agentic AI-first operating model, including our use of artificial intelligence (AI) and other automation tools and resources and our related recent workforce reduction, may not achieve the benefits we expect in the time we expect, if at all, and could adversely affect our business, financial condition, and results of operations.
We are in the process of evolving how we operate our business to an agentic AI-first operating model. As part of this evolution in our operating model, in May 2026 we announced a workforce reduction designed to better align our organizational structure to this operating model and that workforce reduction has been substantially completed. We are also in the process of incorporating AI tools and automation to increase productivity and maintain operational efficiency as we continue this evolution in our operating model. However, we may not realize the expected operating efficiencies, cost savings, or other expected benefits of these changes within the expected timeframe, if at all. Our ability to successfully operate our business after our recent workforce reduction will depend in part on our use of AI and other automation tools and resources and the effectiveness and reliability of these tools and resources. These technologies may be more costly than we currently anticipate, may not perform as expected, may require more time or expense to implement effectively than anticipated, may introduce operational or cybersecurity risks, or may fail to enhance productivity and maintain operational efficiency as expected. Increased use of AI and other automation tools and technologies also could increase the risk of operational disruptions and errors, network interruptions, control failures or other significant events, particularly during transition periods, as internal responsibilities are reassigned and processes are adjusted. Any failure to successfully implement these actions, or any unintended consequences resulting from them, could result in reputational harm, loss of customers, reduction in sales, delays in product development or strategic initiatives, and could materially and adversely affect our business, financial condition and results of operations. Our recent workforce reduction has resulted in severance and other restructuring charges. We may also incur unexpected additional costs in connection with these departures, including as a result of potential claims by employees, organizations that represent employees such as works councils, and governmental or regulatory bodies. In addition, the workforce reduction may disrupt our operations, adversely affect employee morale and productivity, and result in increased employee turnover. The departure of employees, including experienced personnel, may result in the loss of institutional knowledge and expertise, and remaining employees may experience increased workloads, which could lead to increased error rates, reduced innovation, and further attrition of key talent. Although we expect to continue to invest in the employees not impacted by the workforce reduction and those we may hire in the future, the workforce reduction could harm our reputation, make the future retention and hiring of employees more difficult, and require payment of increased compensation. We may also suffer other indirect harms to our business as a result of reputational harm or concerns that our customers and applicable governmental and regulatory bodies have regarding the use of AI. Evolving legal and regulatory requirements and public scrutiny relating to AI technologies could increase our compliance costs or limit our ability to deploy AI and automation tools as intended. In addition, any reassignment of responsibilities, together with potentially increased reliance on automation and AI tools to support certain of our legal, regulatory compliance and risk management functions, may limit our capacity and introduce additional oversight risks. If our AI and automation tools do not perform as anticipated or are not effectively implemented and monitored, our ability to maintain effective governance, compliance, and risk processes could be impaired, which could increase the risk of regulatory inquiries, investigations, litigation, enforcement actions, control deficiencies and penalties.
Risk Highlights Q2, 2026
Risk Word Cloud
Risk Factors Full Breakdown - Total Risks 86
- Share Price & Shareholder Rights - Risk 1AddedIf the Capitalization Changes are implemented, it will affect the relative voting power of our outstanding shares of capital stock.
As described in the proxy statement in connection with our annual meeting of stockholders that occurred in June 2026 (the 2026 Annual Meeting), we intend to implement the Capitalization Changes, which are comprised of (a) the adoption of an amendment to our amended and restated certificate of incorporation authorizing a new class of non-voting common stock (our Class C common stock), (b) the designation of a new series of our preferred stock as Series FF preferred stock (our Series FF preferred stock) with the powers, preferences and rights, and the qualifications, limitations, or restrictions set forth in the Certificate of Designations of Series FF preferred stock, (the Certificate of Designations), (c) entry into an Exchange Agreement, pursuant to which substantially all of the shares of Class B common stock held by our co-founders and certain of their related entities would be exchanged for (i) an equivalent number of shares of Series FF preferred stock and (ii) an equivalent number of shares of Class A common stock (collectively, the Preferred Exchange), and (d) upon the effectiveness of the amended and restated certificate of incorporation (x) each share of Class A common stock issued and outstanding or held as treasury stock immediately prior to the effectiveness of the amended and restated certificate of incorporation, automatically and without further action by us or any stockholder, would be reconstituted and become one share of Class A common stock and one share of Class C common stock; and (y) each share of Class B common stock issued and outstanding or held as treasury stock immediately prior to the effectiveness of the amended and restated certificate of incorporation, automatically and without further action by us or any stockholder, would be reconstituted and become one share of Class B common stock and one share of Class C common stock ((x) and (y), collectively, the Class C Split). At the 2026 Annual Meeting, our stockholders approved the elements of the Capitalization Changes that required stockholder approval. Subject to the litigation related to the Capitalization Changes described below, we anticipate implementing the Capitalization Changes as early as September 2026. If the Capitalization Changes occur, there will be no effect on the proportionate economic interest of any stockholder. However, if the Capitalization Changes occur, (i) our co-founders and their affiliates would experience a de minimis reduction in the number of votes they are able to cast but no change in their relative voting power as a proportion of the voting power of all outstanding shares of our capital stock, (ii) as a result of the automatic conversion of all remaining shares of Class B common stock into shares of Class A common stock, the holders of Class B common stock prior to the Capitalization Changes (other than our co-founders) would experience a reduction in the number of votes they are able to cast and their relative voting power as a proportion of the voting power of all outstanding shares of our capital stock, and (iii) holders of Class A common stock would experience no change in the number of votes they are able to cast but a de minimis increase in their relative voting power as a proportion of the voting power of all outstanding shares of our capital stock. Following the Capitalization Changes, stockholders who sell their shares of Class C common stock will not lose any voting power, but their relative equity interest in us will decrease as a result of such sale. Conversely, stockholders who purchase shares of Class C common stock after the Capitalization Changes will increase their relative equity interest in us but will not gain any additional voting power or have any voting power at all if they do not otherwise own shares of Class A common stock or Series FF preferred stock.
- Share Price & Shareholder Rights - Risk 2AddedIf the Class C Split occurs, it would affect the market price of our outstanding shares of Class A common stock and Class C common stock.
If the Class C Split occurs, we believe that the market price for the shares of our Class A common stock will generally reflect the effect of a two-for-one stock split and, accordingly, the market price of the Class A common stock will decrease by approximately one-half. Assuming that the Class C Split occurs, we expect the market price of shares of Class C common stock to be approximately equal to the market price of shares of Class A common stock, as that market price adjusts as a result of the Class C Split. The trading prices for shares of Class A common stock and Class C common stock may be affected by the relative voting rights between these two classes of stock. Because the Class A common stock carries voting rights, it is possible that it could trade at a premium compared to the Class C common stock. This is particularly true if investors were to place a premium on owning our shares that have voting rights, as opposed to shares without voting rights. Furthermore, the trading price of shares of Class A common stock and Class C common stock would continue to depend on many factors, including our future performance, the relative trading liquidity of the Class A common stock and the Class C common stock, general market conditions, and conditions relating to companies in businesses and industries similar to us. Accordingly, we cannot predict the prices at which shares of Class A common stock and Class C common stock would trade following the Class C Split, just as we could not predict the price at which shares of Class A common stock would trade absent the Class C Split. Following the Capitalization Changes, there will continue not to be any trading market for our Class B common stock and there will not be a trading market for our Series FF preferred stock.
- Share Price & Shareholder Rights - Risk 3AddedAny issuance of additional shares of Class C common stock by us or dispositions of shares of Class C common stock by significant or other stockholders may serve to further increase market activity in the shares of Class C common stock relative to the shares of Class A common stock.
Following implementation of the Capitalization Changes, in order to minimize dilution of voting power to existing stockholders, we are more likely to issue shares of Class C common stock than shares of Class A common stock in the future to further strategic initiatives (such as the acquisition of complementary businesses and raising funds from equity or equity-linked financing transactions), or issue equity awards to our employees, directors, and other service providers. Following the Class C Split, some of our stockholders may sell their shares of Class C common stock but retain their shares of Class A common stock or Series FF preferred stock in order to monetize a portion of their investment in us while retaining their relative voting power. Any such issuance of additional shares of Class C common stock by us or dispositions of shares of Class C common stock by our stockholders may serve to further increase market activity in the shares of Class C common stock relative to the shares of Class A common stock.
- Share Price & Shareholder Rights - Risk 4AddedThe Class C common stock may not be as attractive as our Class A common stock for financings, acquisition currency, or equity incentives.
Following the Class C Split, we expect to utilize the Class C common stock as currency for equity incentives for our service providers, for equity and equity-linked financing transactions, and, to the extent we engage in M&A transactions involving stock consideration, as the stock component of the consideration in those transactions. It is possible that potential financing sources, counterparties and/or employees and directors will view nonvoting Class C common stock negatively as compared to the voting Class A common stock, particularly if the nonvoting Class C common stock trades at a discount to the voting Class A common stock. In these circumstances, it may be more difficult to use the nonvoting Class C common stock as a source for obtaining financing, as consideration for potential acquisition targets or as incentive compensation to hire or retain employees and directors. In that scenario, we may consider using shares of Class A common stock for those purposes, which will dilute the aggregate voting power of its stockholders (including our co-founders), or, in the case of our employees, provide other incentives to compensate them.
- Share Price & Shareholder Rights - Risk 5AddedA liquid trading market for our Class C common stock may not develop and/or our Class C common stock may trade at a discount to our Class A common stock.
The Class C Split would result in each current holder of Class A common stock holding half of its existing economic interest in Class A common stock and half of its existing economic interest in Class C common stock. Following the Class C Split, we expect the Class C common stock to trade in a sufficiently liquid market and for the Class C common stock to trade at a minimal or zero discount to the Class A common stock. However, it is possible that this liquid market will not develop and that the Class C common stock could trade at a more meaningful discount to the Class A common stock.
- Share Price & Shareholder Rights - Risk 6Delaware law and provisions in our amended and restated certificate of incorporation and amended and restated bylaws could make a merger, tender offer, or proxy contest difficult, thereby depressing the market price of our Class A common stock.
Our status as a Delaware corporation and the anti-takeover provisions of the Delaware General Corporation Law may discourage, delay, or prevent a change in control by prohibiting us from engaging in a business combination with an interested stockholder for a period of three years after the person becomes an interested stockholder, even if a change of control would be beneficial to our existing stockholders. In addition, our amended and restated certificate of incorporation and amended and restated bylaws contain provisions that may make the acquisition of our company more difficult, including the following: - our dual-class common stock structure, which provides Mr. Prince and Ms. Zatlyn with the ability to significantly influence the outcome of matters requiring stockholder approval, even if they own significantly less than a majority of the shares of our outstanding Class A common stock and Class B common stock;- our Board of Directors is classified into three classes of directors with staggered three-year terms and directors are only able to be removed from office for cause;- vacancies on our Board of Directors will be able to be filled only by our Board of Directors and not by stockholders;- only the Chair of our Board of Directors, our Chief Executive Officer, or a majority of our entire Board of Directors are authorized to call a special meeting of stockholders;- certain litigation against us can only be brought in Delaware;- our amended and restated certificate of incorporation authorizes undesignated preferred stock, the terms of which may be established and shares of which may be issued, without the approval of the holders of Class A common stock;- advance notice procedures apply for stockholders to nominate candidates for election as directors or to bring matters before an annual meeting of stockholders;- our stockholders will only be able to take action at a meeting of stockholders and not by written consent; and - any amendment of the above anti-takeover provisions in our amended and restated certificate of incorporation or amended and restated bylaws will require the approval of two-thirds of the combined vote of our then-outstanding shares of Class A common stock and Class B common stock. These anti-takeover defenses could discourage, delay, or prevent a transaction involving a change in control of our company. These provisions could also discourage proxy contests and make it more difficult for stockholders to elect directors of their choosing and to cause us to take other corporate actions they desire, any of which, under certain circumstances, could limit the opportunity for our stockholders to receive a premium for their shares of our capital stock, and could also affect the price that some investors are willing to pay for our Class A common stock.
- Share Price & Shareholder Rights - Risk 7Our amended and restated bylaws provide that the Court of Chancery of the State of Delaware and the federal district courts of the United States will be the exclusive forums for substantially all disputes between us and our stockholders, which could limit our stockholders' ability to choose the judicial forum for disputes with us or our directors, officers or employees.
Our amended and restated bylaws provide that the Court of Chancery of the State of Delaware is the sole and exclusive forum for the following types of actions or proceedings under Delaware statutory or common law: (i) any derivative action or proceeding brought on our behalf; (ii) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, stockholders, officers, or other employees to us or our stockholders; (iii) any action arising pursuant to any provision of the Delaware General Corporation Law, our amended and restated certificate of incorporation or our amended and restated bylaws; or (iv) any other action asserting a claim that is governed by the internal affairs doctrine shall be the Court of Chancery of the State of Delaware (or, if the Court of Chancery does not have jurisdiction, the federal district court for the District of Delaware), in all cases subject to the court having jurisdiction over indispensable parties named as defendants. Our amended and restated bylaws further provide that the U.S. federal district courts will be the sole and exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act, against any person in connection with any offering of our securities, including any auditor, underwriter, expert, control person, or other defendant. Any person or entity purchasing, holding, or otherwise acquiring any interest in any of our securities shall be deemed to have notice of and consented to this provision. These exclusive-forum provisions may limit a stockholder's ability to bring a claim in a judicial forum of its choosing for disputes with us or our directors, officers, or other employees, which may discourage lawsuits against us and our directors, officers, and other employees. If a court were to find the exclusive-forum provision in our amended and restated bylaws to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving the dispute in other jurisdictions, which could harm our results of operations.
- Share Price & Shareholder Rights - Risk 8Our Class A common stock market price and trading volume could decline if equity or industry analysts do not publish research or publish inaccurate or unfavorable research about our business.
The trading market for our Class A common stock depends in part on the research and reports that equity or industry analysts publish about us or our business. The analysts' estimates are based upon their own opinions and are often different from our estimates or expectations. If one or more of the analysts who cover us downgrade our Class A common stock or publish inaccurate or unfavorable research about our business, the price of our securities would likely decline. If few securities analysts commence coverage of us, or if one or more of these analysts cease coverage of us or fail to publish reports on us regularly, demand for our securities could decrease, which might cause the price and trading volume of our Class A common stock to decline.
- Share Price & Shareholder Rights - Risk 9An active trading market for our Class A common stock may not be sustained.
Our Class A common stock is listed on the NYSE under the symbol "NET." However, we cannot assure you of the likelihood that an active trading market for our Class A common stock will be maintained, the liquidity of any trading market, your ability to sell your shares of our Class A common stock when desired, or the prices that you may obtain for your shares.
- Share Price & Shareholder Rights - Risk 10The trading price of our Class A common stock may be volatile, and you could lose all or part of your investment.
The trading price of our Class A common stock may be volatile and could be subject to fluctuations in response to various factors, some of which are beyond our control. These fluctuations could cause you to lose all or part of your investment in our Class A common stock. Factors that could cause fluctuations in the trading price of our Class A common stock include: - price and volume fluctuations in the overall stock market from time to time;- volatility in the trading prices and trading volumes of technology stocks or high growth companies;- changes in operating performance and stock market valuations of other technology or high growth companies generally, or those in our industry in particular;- sales of shares of our Class A common stock and Class B common stock by us or our stockholders;- issuance of shares of our Class A common stock and Class B common stock, whether in connection with an acquisition, upon conversion of some or all of our outstanding Notes, or in connection with employee equity awards;- failure of securities analysts to maintain coverage of us, changes in financial estimates or share price targets by securities analysts who follow our company, or our failure to meet these estimates or the expectations of investors;- the financial guidance we may provide to the public, any changes in such guidance, or our failure to meet such guidance;- announcements by us or our competitors of new products, features, or services or any delays in our general release of products we previously announced as being in development or beta testing;- the public's reaction to our press releases, other public announcements, and filings with the SEC;- rumors and market speculation involving us or other companies in our industry;- actual or anticipated changes in our results of operations or fluctuations in our results of operations;- actual or anticipated developments in our business, our competitors' businesses or the competitive landscape generally;- investments we may make in equity that is, or may become, publicly held, and volatility we may experience due to changes in the market prices of such equity investments;- litigation involving us, our industry, or both, or investigations by regulators into our operations or those of our competitors;- developments or disputes concerning our intellectual property or other proprietary rights;- actual or perceived network or data security breaches or other network or data security incidents, including any network or product outages or failures;- announced or completed acquisitions of businesses, products, services, or technologies by us or our competitors;- failures or alleged failures to comply with laws or regulations applicable to our business;- new laws or regulations or new amendments to, or interpretations of, existing laws or regulations applicable to our business;- changes in accounting standards, policies, guidelines, interpretations, or principles;- any departure of one of our co-founders from our company or any other significant change in our management; and - general economic conditions and slow or negative growth of our markets, including inflation and related changes in monetary policy, changing interest rates, volatile energy prices, and other impacts of conflicts and geopolitical tension around the world, or any worsening or expansion of those conflicts or tensions. In addition, in the past, following periods of volatility in the overall market and the market price of a particular company's securities, securities class action litigation has often been instituted against these companies. This litigation, if instituted against us, could result in substantial costs and a diversion of our management's attention and resources.
- Share Price & Shareholder Rights - Risk 11The dual class structure of our common stock has the effect of concentrating voting control with those stockholders who held our capital stock prior to the completion of our initial public offering, and it may depress the trading price of our Class A common stock.
Our Class B common stock has 10 votes per share and our Class A common stock has one vote per share. As of June 30, 2026, our directors, executive officers, and holders of more than 5% of our common stock, and their respective affiliates, held in the aggregate 66.0% of the voting power of our capital stock, with Matthew Prince and Michelle Zatlyn (our co-founders) together holding approximately 49.3% of the voting power of our capital stock. Because of the ten-to-one voting ratio between our Class B and Class A common stock, the holders of our Class B common stock collectively continue to control a majority of the combined voting power of our common stock and therefore are able to control all matters submitted to our stockholders for approval. This concentrated control will limit or preclude the ability of holders of Class A common stock to influence corporate matters for the foreseeable future, including the election of directors, amendments of our organizational documents, and any merger, consolidation, sale of all or substantially all of our assets, or other major corporate transaction requiring stockholder approval. In addition, this may prevent or discourage unsolicited acquisition proposals or offers for our capital stock that you may feel are in your best interest as one of our stockholders. Future transfers by holders of shares of Class B common stock and the cessation of employment by holders of our Class B common stock generally result in those shares converting to Class A common stock, subject to limited exceptions, such as certain transfers effected for estate planning purposes and transfers between related entities. The conversion of Class B common stock to Class A common stock will have the effect, over time, of increasing the relative voting power of those individual holders of Class B common stock who retain their shares in the long-term. Additionally, our dual-class capital structure in some cases may make us ineligible for inclusion in certain indices, and as a result, mutual funds, exchange-traded funds, and other investment vehicles that attempt to passively track these indices may not invest in our stock if we are not included. For example, Standard & Poor's previously excluded companies utilizing dual or multi-class capital structures from its indices, but reversed this policy in 2023, and companies with dual or multi-class capital structures have been eligible for inclusion on its indices since then. We cannot be sure that such policy, or the policies of other indices, will not change further and make us ineligible for inclusion on the S&P Composite 1500, or other indices, in the future, which could depress our valuations compared to those of other similar companies that do not have dual or multi-class capital structures.
- Share Price & Shareholder Rights - Risk 12Substantial future sales could depress the market price of our Class A common stock.
The market price of our Class A common stock could decline as a result of sales of a large number of shares of such stock, and the perception that these sales could occur may also depress the market price of our Class A common stock. We file registration statements to register shares reserved for future issuance under our equity compensation plans. As a result, subject to the satisfaction of applicable exercise periods, the shares issued upon exercise of outstanding stock options or upon settlement of outstanding RSU awards are available for immediate resale in the United States in the open market. Sales of our shares may make it more difficult for us to sell equity securities in the future at a time and at a price that we deem appropriate. These sales also could cause the trading price of our Class A common stock to fall and make it more difficult for you to sell shares of our Class A common stock.
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.