The most educational part of an IPO filings (S-1) is the company’s list of its own risk factors. Lawyers spend days putting these together, to protect the company from the liabilities of inadequate disclosure. Management wishes the “Risks Related to Our Business and Industry” section of the SEC filing not exist at all. Executives simply look at the descriptions as a way to ward off investors.
For its S-1, the Facebook risk factors:
• users increasingly engage with competing products; • we fail to introduce new and improved products or if we introduce new products or services that are not favorably received;
• we are unable to successfully balance our efforts to provide a compelling user experience with the decisions we make with respect to the frequency, prominence, and size of ads and other commercial content that we display;
• we are unable to continue to develop products for mobile devices that users find engaging, that work with a variety of mobile operating systems and networks, and that achieve a high level of market acceptance;
• there are changes in user sentiment about the quality or usefulness of our products or concerns related to privacy and sharing, safety, security, or other factors;
• we are unable to manage and prioritize information to ensure users are presented with content that is interesting, useful, and relevant to them;
• there are adverse changes in our products that are mandated by legislation, regulatory authorities, or litigation, including settlements or consent decrees;
• technical or other problems prevent us from delivering our products in a rapid and reliable manner or otherwise affect the user experience;
• we adopt policies or procedures related to areas such as sharing or user data that are perceived negatively by our users or the general public;
• we fail to provide adequate customer service to users, developers, or advertisers;
• we, our Platform developers, or other companies in our industry are the subject of adverse media reports or other negative publicity; or
• our current or future products, such as the Facebook Platform, reduce user activity on Facebook by making it easier for our users to interact and share on third-party websites.