Risk Factor Metrics

June 12, 2010

Saturday, June 12, 2010

Knowing what type of disclosure is market standard is paramount when preparing SEC filings.

Most Common Form 10-K Risk Factors

Intelligize’s Precedent Check application instantly reviewed almost 5,000 Form 10-Ks filed in the last six months and determined that the following are the most commonly used Risk Factors:

Rank	Risk Factor	Prevalence
1	Failure to Compete Successfully	73%
2	General Economic/Consumer Spending Conditions	57%
3	Dependence on Management Team	47%
4	Difficulty Raising Capital/Insufficient Funding	46%
5	Potential Share Price Volatility	43%
6	Integration Challenges from Merger/Acquisition	33%
7	Negative Impact of Changes in Regulations/Policies	33%
8	Operational Disruptions	32%
9	Failure to Successfully Implement Business Strategy	31%
10	Failure to Protect Intellectual Property Rights	31%

Most Common Form S-1 Risk Factors

Precedent Check reviewed the 1,000 most recent S-1 filings and determined that the below Risk Factors are the most common Business Risks. They generally track the most common Form 10-K Risk Factors, except for a greater emphasis on future growth uncertainties and a limited track record (see highlighted Risk Factors below).

Rank	Business Risk Factors	Prevalence
1	Failure to Compete Successfully	90%
2	Dependence on Management Team	78%
3	Difficulty Raising Capital/Insufficient Funding	74%
4	Integration Challenges from Merger/Acquisition	52%
5	Failure to Protect Intellectual Property Rights	50%
6	Limited Operating History	44%
7	Failure to Manage Growth / Expansion Costs	43%
8	Threat/Costs of Intellectual Property Infringement Claims	41%
9	Potential/Current Litigation/Claims	39%
10	History of Losses/No Revenue	39%

The most common Form S-1 Offering Risks are listed below.

Rank	Offering Risk Factors	Prevalence
1	Trading Market May Not Develop/Potential Share Price Volatility	86%
2	Principal Shareholders/Management Will Have Significant Control	71%
3	Future Share Sales May Depress Share Price	66%
4	Anti-Takeover Provisions May Prevent a Merger/Acquisition	57%
5	Dividends May Never Be Paid	53%
6	Immediate and Substantial Dilution Following Offering	48%
7	Dilution in Ownership Due to Future Share Issuances/Conversions	37%
8	Failure to Maintain Effective Internal Controls	32%
9	Broad Discretion in the Use of Proceeds From the Offering	30%
10	Stock is Subject to Penny Stock Rules	27%

The above prevalence rankings show that S-1s have significantly less variance in risk factors compared to 10-Ks. Ten Risk Factors appear in 0% or more S-1 filings. In contrast, only two Risk Factors appear in 50% or more Form 10-K filings. Precedent Check gives powerful and useful data about the prevalence of Risk Factors as well as all other headings in SEC filings.

Click here to learn more about how Precedent Check can help you prepare more accurate SEC filings and help you stay a step ahead of your competitors.

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