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Forbes Energy Services (FLSS) Risk Analysis

Public companies are required to disclose risks that can affect the business and impact the stock. These disclosures are known as “Risk Factors”. Companies disclose these risks in their yearly (Form 10-K), quarterly earnings (Form 10-Q), or “foreign private issuer” reports (Form 20-F). Risk factors show the challenges a company faces. Investors can consider the worst-case scenarios before making an investment. TipRanks’ Risk Analysis categorizes risks based on proprietary classification algorithms and machine learning. Forbes Energy Services disclosed 43 risk factors in its most recent earnings report. Forbes Energy Services reported the most risks in the “Finance & Corporate” category.

Risk Overview Q1, 2020

Source: the company's latest filing for the period ended Mar 31, 2020, filed Jun 29, 2020

Risk Distribution
43Risks
Sector Avg.Finance & CorporateTech & InnovationLegal & RegulatoryProductionAbility to SellMacro & Political
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy

Risk Change Over Time

No filing history is available.

Risks removedRisks addedRisks changedForbes Energy Services Risk Factors
New Risk (2)
  • Corporate Activity and Growth - Risk 1
    The termination of the Merger Agreement could negatively impact the Company, including impairing its ability to continue as a going concern.

    The Merger Agreement's termination may have various consequences, including that the Company's business may be adversely impacted by the failure to pursue other beneficial opportunities due to the focus of management on the Mergers, without realizing any of the anticipated benefits of completing the transaction. The Company has incurred substantial net losses and losses from operations for the years ended December 31, 2019 and 2018 and the three months ended March 31, 2020. As of March 31, 2020, the Company had cash and cash equivalents of approximately $8.1 million and negative working capital of approximately $0.3 million, after taking into account that the mandatorily convertible notes of $61.8 million will not result in a cash settlement. The Company's Revolving Loan is also due January 2021. Recent negotiations to extend the maturity date have not been successful and there can be no assurance that the Company will be able to negotiate an extension on the current Revolving Loan or have sufficient funds to repay its obligations when they come due. In addition, the Company has $61.8 million of mandatorily convertible PIK Notes outstanding as of March 31, 2020, but does not at present have sufficient authorized common share capital to fully convert the PIK Notes upon maturity. In addition, the Company may not have access to other sources of external capital on reasonable terms or at all. We also expect to experience continued volatility in market demand which creates oil and gas price fluctuations as well as external market pressures due to effects of global health concerns such as the recent outbreak of COVID-19 and the precipitous decline in oil prices that are not within our control. As a result of these and other factors, there is substantial doubt that the Company will be able to continue as a going concern. Since the Mergers will not be completed, these concerns will be heightened, and there can be no assurance that alternative strategic plans will provide sufficient liquidity for the Company to continue its operations.

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Risk Highlights Q1, 2020

Main Risk Category
Finance & Corporate
With 17 Risks
Number of Disclosed Risks
43
+2
From last report
S&P 500 Average: 32
Recent Changes
2Risks added
0Risks removed
1Risks changed
Since Mar 2020
Number of Risk Changed
1
-2
From last report
S&P 500 Average: 1

Risk Word Cloud

uncertainties associated with the mergers may distract management personnel and other key employees and divert their attention away from growing our business, which could adversely affect our future business and operations.adversely affect our future businessour term loans, pik notes, and operating lease commitments could restrict our operations and make us more vulnerable to adverse economic conditions.vulnerable to adverse economic conditionsour customer base is concentrated within the oil and natural gas production industry and loss one or more significant customers could cause our revenue to decline substantially.our revenue to decline substantiallywe are subject to extensive governmental regulation.subject to extensive governmental regulationwe may not be able to fully integrate future acquisitions.to fully integrate future acquisitionsimpairment of our long-term assets may adversely impact our financial position and results of operations.impairment of our long-term assetswe incur significant costs as a result of being obligated to comply with securities exchange act reporting requirements, the sarbanes-oxley act, and the term loan agreement covenants and that our management is required to devote substantial time to compliance matters.securities exchange act reporting requirementsthe industry in which we operate is highly volatile and dependent on domestic spending by the oil and natural gas industry, and continued and prolonged reductions in oil and natural gas prices and in the overall level of exploration and development activities may further reduce our levels of utilization, demand for our services, or pricing for our services.reduce our levels of utilizationwe extend credit to our customers which presents a risk of non-payment.extend credit to our customersimpairment of our long-term assets may adversely impact our financial position and results of operations.adversely impact our financial position

Risk Factors Full Breakdown - Total Risks 43

Share Price & Shareholder Rights5 | 11.6%
  • Share Price & Shareholder Rights - Risk 1
    Company stockholders will experience a reduction in percentage ownership and voting power in Newco as a result of the Mergers.

    Company stockholders will experience a substantial reduction in their percentage ownership interests and effective voting power in respect of Newco relative to their percentage ownership interests in the Company prior to the Mergers. Consequently, Company stockholders should expect to exercise less influence over the management and policies of Newco following the Mergers than they currently exercise over the management and policies of the Company.

  • Share Price & Shareholder Rights - Risk 2
    The Forbes Merger may trigger certain "change of control" provisions and other restrictions in contracts of the Company and the failure to obtain any required consents or waivers could adversely impact Newco.

    Certain agreements of the Company will or may require the consent or waiver of one or more counterparties in connection with the Forbes Merger. The failure to obtain any such consent or waiver may permit such counterparties to terminate, or otherwise increase their rights or the Company's obligations under, any such agreement because the Forbes Merger may violate an anti-assignment, change of control or similar provision relating to any of such transactions. If this occurs, the Company may have to seek to replace that agreement with a new agreement or seek an amendment to such agreement. The Company cannot assure you that it will be able to replace or amend any such agreement on comparable terms or at all. If any such agreement is material, the failure to obtain consents, amendments or waivers under, or to replace on similar terms or at all, any of these agreements could adversely affect the financial performance or results of operations of Newco following the Mergers.

  • Share Price & Shareholder Rights - Risk 3
    Some of our executive officers have interests in the Mergers that are different from the interests of our stockholders generally.

    Some of our executive officers have interests in the Mergers that are different from, or are in addition to, the interests of our stockholders generally. These interests may include vesting of their equity awards in connection with the consummation of the Mergers.

  • Share Price & Shareholder Rights - Risk 4
    We incur significant costs as a result of being obligated to comply with Securities Exchange Act reporting requirements, the Sarbanes-Oxley Act, and the Term Loan Agreement covenants and that our management is required to devote substantial time to compliance matters.

    As a public company, we incur significant legal, accounting, insurance and other expenses, including costs associated with public company reporting requirements. We also have incurred and will incur costs associated with the Sarbanes-Oxley Act of 2002 and related rules implemented by the SEC. We will incur ongoing periodic expenses in connection with the administration of our organizational structure. The expenses incurred by public companies generally for reporting and corporate governance purposes have been increasing. We expect these rules and regulations to increase our legal and financial compliance costs and to make some activities more time-consuming and costly, although we are currently unable to estimate these costs with any degree of certainty. In estimating these costs, we took into account expenses related to insurance, legal, accounting, and compliance activities, as well as other expenses not currently incurred. These laws and regulations could also make it more difficult or costly for us to obtain certain types of insurance, including director and officer liability insurance, and we may be forced to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. These laws and regulations could also make it more difficult for us to attract and retain qualified persons to serve on our Board, our Board committees or as our executive officers. Furthermore, if we are unable to satisfy our obligations as a public company, we could be subject to fines, sanctions and other regulatory action and potentially civil litigation.

  • Share Price & Shareholder Rights - Risk 5
    We have anti-takeover provisions in our organizational documents that may discourage a change of control.

    Our organizational documents contain provisions that could make it more difficult for a third party to acquire us without the consent of our Board. These provisions provide for the following: - requirements that our Board be divided into three classes, serving in staggered three year terms, which may not be altered or repealed without the affirmative vote of the holders of at least 80% of the shares entitled to vote in an election of directors;- requirements that any action required or permitted to be taken by our stockholders must be effected at a duly called annual or special meeting of such stockholders and may not be effected by consent in writing by such stockholders;- requirements that special meetings of stockholders may be called only by our Chief Executive Officer, our Chairman of the Board, or our Board;- restrictions on the ability of a person who would be an "interested stockholder" (as defined in our Certificate of Incorporation) to effect various business combinations with us for a three-year period;- requirements that if notice is provided for a stockholders meeting, other than an annual meeting, the business transacted at such meeting shall be limited to the matters so stated in our notice of meeting;- renouncement of the "corporate opportunity" doctrine as it applies to certain stockholders and the affiliates of such stockholders; and - rights to issue authorized but unissued shares of our common stock and/or any preferred stock without stockholder approval. In addition, our organizational documents do not provide for cumulative voting with respect to the election of directors or any other matters, and cumulative voting is not otherwise provided under state law. All of the foregoing provisions could make it more difficult for a third party to acquire, or discourage a third party from attempting to acquire control of us, even if the third party's offer was considered beneficial by many stockholders. As a result, these provisions could limit the price that investors might be willing to pay in the future for shares of our common stock and may have the effect of delaying or preventing a takeover of the Company that would otherwise be beneficial to investors.

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.