Item 1A. Risk Factors.
The risks described below reflect our beliefs and opinions as to factors that could hurt our business, financial condition, or operating results in the future. Although it is not possible to predict or identify all such risks and uncertainties, they may include the factors discussed below. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties that we are unaware of, or that we currently believe are not material, may also become important factors that challenge our business or results of operations. References to past events are provided by way of example only and are not intended to be a complete listing or a representation as to whether or not such factors have occurred in the past or their likelihood of occurring in the future.
Risks Related to Our Business and Industry
Our business depends on our ability to attract new subscribers and persuade them to renew their subscriptions and purchase additional products and services from us. If we are unable to attract new subscribers or fail to engage existing subscribers, our revenue and operating results may suffer.
To increase our revenue and maintain profitability, we must attract new subscribers, retain existing subscribers, and expand the subscriptions of current customers. Our ability to do so depends in part on the quality of our content, including the performance of the investment research we publish. If the performance of such research falls short of our subscribers’ expectations, our ability to attract and retain subscribers will decline.
A substantial amount of our revenue is generated from subscription renewals by our existing subscribers. Our subscribers have no obligation to renew their subscriptions once the subscription period, typically one year, expires. In the normal course of business, some subscribers will elect not to renew their subscriptions. In addition, our subscribers may renew for lower subscription amounts or for shorter contract lengths. We may not accurately predict renewal rates for our subscribers, and our renewal rates may decline or fluctuate as a result of various factors, including subscriber engagement and product utilization levels, quality of our content, price changes, expiration of temporary product promotions, number of products or services used by our subscribers, customer satisfaction or dissatisfaction, pricing or capabilities of the products and services offered by our competitors, increased competition, reduction in customer spending levels, changes in our renewal policies or practices, and deteriorating general economic conditions. We must continually add more new subscribers than those who do not renew their subscriptions to grow our business beyond our current subscriber base. This effort may involve significantly higher marketing expenses. If our subscribers do not renew their subscriptions, buy additional content, or maintain or increase the amount they spend with us, our revenue will decline and our business will .
Our success also depends on our ability to sell additional products, more subscriptions, or higher-priced and premium editions of our products and services to our current subscribers. Doing so requires increasingly sophisticated and costly sales efforts. We seek to expand existing subscriptions by deepening customer engagement by expanding our portfolio of tools and products for purchase. The rate at which our existing subscribers purchase new or enhanced services depends on a number of factors, including the quality of our content, general economic conditions, the level of interest and investment in individual stocks and other self-directed investment vehicles versus index funds, exchange-traded funds and other passive investment vehicles, number of products or services used by our subscribers, customer satisfaction or dissatisfaction with our products or services, pricing or capabilities of the products and services offered by our competitors, increased competition, reduction in customer spending levels, and our subscribers’ receptiveness to higher-priced and premium tools and products.
Many of our subscribers initially register for subscriptions to our free products and services. We strive to demonstrate the value of our free products to our subscribers, thereby encouraging them to convert to paying subscribers. As of December 31, 2025, we had approximately 2 million total subscribers, of which approximately 374 thousand were Paid Subscribers. The actual number of unique subscribers may be lower than we report as one person could count as multiple Active Free Subscribers or Paid Subscribers. As a result, we may have fewer unique subscribers that we may be able to convert, upsell or cross-sell. Our inability to determine the number of our unique subscribers is a limitation in the data that we measure and may adversely affect our understanding of certain aspects of our business and make it more challenging to manage our business. Most of our Active Free Subscribers never
convert to a Paid Subscribers, and if we are unable to convert a sufficient number of Active Free Subscribers to Paid Subscribers, our business, results of operations and financial condition could suffer.
If we fail to adequately market our products and services, or to monitor and manage our use of social media platforms as marketing tools, it could harm our business’s operations and financial condition.
Our marketing efforts are designed to identify and attract prospective subscribers primarily within our target market and ultimately convert them into long-term subscribers. We also employ marketing to promote our content, drive conversation about our content and services, and promote website visits by our subscribers. We utilize a broad mix of marketing programs and platforms, including social media sites, to promote our services and content to current and prospective subscribers.
In order to successfully reach a larger number of prospective subscribers and attract new subscribers, we must continually assess the manner and platforms on which we are marketing our products and services. Rapid changes in technology and the ways in which people are reached can make this process more difficult. If we are unable to effectively and efficiently market our products and services, our business, results of operations, and financial condition may decline.
For example, email communication has historically been one of our primary means of communicating with our subscribers and keeping them engaged with our products. Our ability to communicate via email enables us to keep our subscribers updated on new products and present discount and promotional offers. As consumer habits evolve in the era of web-enabled mobile devices and messaging/social networking apps, email usage, particularly among the younger demographic, has declined. In addition, restrictions imposed by third-party email providers and/or applicable law have limited our ability to send emails to our current or prospective subscribers. While we continually work to find new means of communicating and connecting with our subscribers, we cannot guarantee that such alternative means of communication will work. Any failure to develop or take advantage of new means of communication or limitations on those means of communications imposed by laws, device manufacturers, or other sources could hurt our business, financial condition, and results of operations.
We may also limit or discontinue use or support of certain marketing sources or activities if advertising costs increase or if we believe that certain marketing platforms or practices are intrusive or damaging to our brand. In addition, companies that promote our services or permit us to use their marketing platforms may decide that their relationship with us hurts their business, or they may make business decisions that harm us. For example, if a company that currently promotes our business decides to compete directly with us, enter a similar business, deny us access to its platform, or exclusively support our competitors, we may no longer have access to their marketing channels.
If we are unable to cost-effectively use social media platforms or ad networks as marketing tools, our ability to acquire new subscribers and our financial condition may suffer. Unauthorized or inappropriate use of our social media channels could result in harmful publicity or negative customer experiences, which could undermine our marketing in these channels. In addition, substantial negative commentary by others on social media platforms could hinder our ability to successfully connect with consumers.
Agencies, such as the U.S. Federal Trade Commission (the “FTC”) and state consumer protection agencies, regulate our marketing activities with extensive and rapidly evolving rules. We have received regulatory inquiries from state consumer protection agencies and could be the subject of further regulatory inquiry in the future. The failure by us, our employees, or third parties acting at our direction to comply with applicable laws and regulations could subject us to regulatory investigations, lawsuits, including class actions, liability, fines, or other penalties. Any such actions could challenge our business. Increasing our use of social media platforms for product promotion and marketing will increase our need to monitor our compliance with regulations surrounding social media marketing, and increase the risk that some materials could contain problematic claims.
Inefficient or ineffective promotion of our content could prevent us from maintaining and growing our subscriber base, which would harm our business, results of operations, and financial condition.
Failure to maintain and protect our reputation for trustworthiness and independence may harm our business. In addition, our business, results of operations, and financial condition could suffer from attacks on the reputation of any of our current or former directors, officers, key contributors, editors, or editorial staff.
We believe our portfolio of brands are highly regarded because of the integrity of their editorial content. Independence is at the core of our brands and business, and we believe that the reputation of our company and our brands is one of our greatest assets. Importantly, we believe that one of our greatest competitive advantages is the loyalty that we have gained from our subscribers as a direct result of our brand, reputation for integrity, and ability to deliver high-quality products and services. To protect our brands, our corporate policies, codes of conduct, and workplace culture demand that all of our content providers, whether employees or outside contributors, adhere to rigorous standards of integrity and independence. Our internal guidelines are designed to prevent any actual, potential, or perceived conflict of interest, and ensure we comply with all applicable laws, including securities laws. The occurrence of events such as our misreporting a market event, the non-disclosure of a security ownership position by one or more of our content providers, the manipulation of a security by one or more of our content providers, or any other of our compliance policies could our reputation for trustworthiness and reduce our subscriber base. our rigorous standards of and independence, we have experienced instances where our content providers have not lived up to these standards and have our compliance policies. These events can our reputation for trustworthiness and independence, and may have an effect on our business, results or operations, and financial condition. For example, we have content providers for our corporate policies and operating businesses because of the reputational caused by such policy .
Any harm to the reputation of any of our current or former directors, officers, key contributors, editors, or staff could adversely affect us because of our association with such individual. Our operating brands depend heavily on the ideas and reputation of their editors and editorial teams, and often name products and operating companies after members of those editorial teams. Our editors and editorial team members have been the subject of regulatory actions, accusations, claims, investigations, lawsuits, and/or settlements, which may have had and may continue to have a negative impact to our reputation, subscriber base, and financial results.
In addition, failing to instill in our employees the expectation of independence and integrity may devalue our reputation over time.
Other factors beyond our control could also harm our reputation. Adverse news reports about our products and services, bad press about the investment newsletter industry generally, or about key personnel associated with our business could hurt our business, results of operations, and financial condition.
If we fail to effectively manage our growth, our business, results of operations, and financial condition could be harmed.
The scope and complexity of our business have increased significantly in recent years, creating significant challenges for our management, operational, and financial resources. As our operations or the number of our third-party relationships continue to grow, our information technology systems and our internal controls and procedures may not be adequate to support our operations. To effectively manage our growth, we must continue to improve our operational, financial, and management processes and systems and to effectively expand, train, and manage our employee base. If our organization experiences growth or we are required to implement more complex organizational management structures, we may find it increasingly difficult to maintain the benefits of our corporate culture, including our ability to quickly develop and launch new and innovative products and solutions.
We must effectively integrate, develop, and motivate new employees, and we must maintain the beneficial aspects of our corporate culture. Otherwise, our business performance could suffer.
In addition, our growth may make it difficult to evaluate our future prospects. Our ability to forecast our future results of operations is subject to a number of uncertainties, including our ability to effectively plan for and model future growth. We have encountered in the past, and may encounter in the future, risks and uncertainties frequently experienced by growing companies in rapidly changing industries. If we fail to effectively manage our growth, our
efficiency, ability to meet our forecasts, and employee morale, productivity, and retention could suffer, and our business, results of operations, and financial condition could be adversely affected.
Our future success depends on attracting, developing, and retaining capable management, editors, and other key personnel.
Our ability to compete in the marketplace depends upon our ability to recruit and retain key employees, including executives to operate our business, technology personnel to run our publishing, commerce, communications, video, and other systems, direct marketers to sell subscriptions, and salespersons to sell our subscriptions, and financial editors and analysts to fulfill our editorial products.
In addition, some of our products, particularly our editorial products, reflect the talents, efforts, personalities, investing skills, portfolio returns, and reputations of their respective editors and analysts. As a result, the services of these key editors and analysts form an essential element of our revenue generation. The pool of editors and analysts with the personality, skills, training, and education necessary to meet our standards is limited. We compete with many businesses and organizations that are seeking skilled individuals, particularly those with experience in the financial industry and those with degrees in technical fields. Competition for such professionals can be intense, as other companies seek to enhance their positions in the markets we serve.
Several of our employees are bound by agreements containing non-competition provisions. However, the laws governing the effectiveness and usage of non-competition provisions are rapidly evolving. We cannot guarantee that these arrangements with key employees will provide adequate protections to us or will not result in management changes. In addition, retaining our key executives, as well as other employees, through competitive salaries, stock ownership, and bonus plans may increase our costs. Nevertheless, we can make no assurances that these programs will allow us to retain our management or key employees or hire new employees. Losing key employees, if we cannot attract qualified replacements, could harm our business, results of operations, and financial condition.
We face significant competition. Many of our competitors and potential competitors have larger customer bases, more established brand recognition, and greater financial, marketing, technological, and personnel resources than we do, which could put us at a competitive disadvantage. Additionally, some of our competitors and potential competitors are better capitalized than we are and are able to obtain capital more easily, which could put us at a competitive disadvantage.
We experience intense competition across all markets for our products. Our competitors range in size from smaller, specialized publishers to multimillion-dollar corporations. Many of our competitors have larger customer bases, more established name recognition, greater market share, and larger financial, marketing, technological, and personnel resources than we do. Our industry has few barriers to entry, and we expect to face additional competition from new entrants into the financial publishing industry. In particular, our services face intense competition from other providers of business, personal finance, and investing content, including:
• free online financial news aggregators and content providers, like Yahoo! Finance and Seeking Alpha;
• traditional financial news publishers, like The Wall Street Journal, Investor’s Business Daily, and Barron’s;
• consumer-focused online subscription businesses, such as The Motley Fool;
• social media networks, subscription networks, and content platforms, like X, Reddit and Substack; and
• institutional financial software providers, such as Bloomberg, FactSet, and IHS Markit.
Our ability to compete successfully depends on many factors, including:
• the quality, originality, timeliness, insightfulness, and trustworthiness of our content;
• the popularity and performance of our contributors;
• the success of our recommendations and research;
• our ability to introduce products and services that keep pace with new investing trends;
• our ability to adopt and deploy new technologies for running our business;
• the ease of use of services developed by us or our competitors, and the effectiveness of our sales and marketing efforts.
Future competition may result in price reductions, lower sales volumes, reduced margins, or loss of market share, any of which could damage our business, results of operations, and financial condition.
Additionally, advances in technology have reduced the cost of production and online distribution of print, audio, and video content. Lower production costs has reduced and/or removed barriers for market entry to providers of both free and paid content. Many of our competitors offer ad-sponsored content that enables them to deliver content for low, or no, subscription costs. While most of our platforms do not rely on ad-sponsored content, we compete with these other publications and services for customers, employees, and contributors.
In addition, media technologies and platforms are rapidly evolving, and the technologies and platforms through which data is consumed can shift quickly. Some competitors may more quickly take advantage of consumer preference for new technologies and platforms. Distributing content via these new technologies and platforms may prove more economic than using our current platforms. If we fail to offer our content in the manner or on the platforms in which our audience desires to consume it, or if we do not have offerings that are as compelling and/or cost effective as those of our competitors, our business, results of operations, and financial condition may suffer.
Adverse or weakened conditions in the financial sector, global financial markets, and the broader global economy, trade policies, and geopolitical events may impact our business, financial conditions and results of operations.
Our performance is influenced by general economic trends, political and regulatory developments, and the overall stability and functioning of financial markets. Global macroeconomic conditions and U.S. financial markets remain vulnerable to a range of risks posed by factors such as, economic recessions, fluctuation in interest rates, rising inflation, volatility in commodity prices, foreign currency movements, trade policies and international tariffs, and broader social, political and economic instability. Additional risks include actual or threatened hostilities, military conflict and acts of war, terrorism, civil unrest, uncertain in major global economies, complications affecting global trade or travel, and geopolitical tensions, including conflicts in the Middle East, Russia and Ukraine, concerns about China’s economy, complications involving terrorism, armed conflicts, civil around the world, or other to global trade, related sanctions and other restrictive governmental actions.
Any downturn and volatility in the economy or financial markets could affect customer confidence and behavior, leading to reductions or delays in capital spending, discretionary purchases, and investments in data and content solutions. Our average customers are people at or approaching retirement age who may be particularly vulnerable during economic downturns. As a result, unfavorable market or economic conditions could reduce demand for our products and services and negatively affect our revenues, cash flows, and overall financial performance.
Our success depends on our ability to respond to and adapt to changes in technology and consumer behavior.
The technology landscape has been changing at an accelerating rate over the past several years. Advances in technology have led to an increasing number of methods for delivery of content and have resulted in a wide and evolving variety of consumer demands and expectations. The increasing number of digital media options available on the Internet, through social-networking tools, mobile applications and other devices, is expanding consumer choice significantly.
Given a multitude of media choices and a dramatic increase in accessible information, consumers may place greater value on when, where, how, and at what price they consume digital content. If we are unable to exploit new and existing technologies to distinguish our products and services from those of our competitors or adapt to new distribution methods that provide optimal user experiences, our business, results of operations, and financial
condition may weaken. In addition, our reputation could suffer if consumers perceive that we are not moving quickly enough to meet the changing needs of investors.
Our future success will depend upon our ability to identify and develop new products and enhancements that address the needs of our target markets and respond to their changing demands. We may not always be successful in developing, introducing, marketing, licensing, and implementing new products and enhancements on a timely and cost-effective basis or without impacting the performance, stability, security, or efficiency of existing products and customer systems. Further, any new products and enhancements may not adequately meet the needs of our target markets. Our failure to anticipate and respond to changes in the marketplace, including competitor and supplier developments, may hinder our business, operations, and growth.
As technology continues to evolve, the expenditures necessary to integrate new technology into our products and services could be substantial. We may incur additional operating expenses if such integration projects take longer than anticipated. Other companies employing new technologies before we are able to do so could compete with our business. If we are not successful in responding to changes in technology and consumer behavior, we may lose new business opportunities or potential renewals or upgrades from existing subscribers.
If we are unable to successfully integrate acquisitions, identify and integrate future acquisitions, or dispose of assets and businesses, our results of operations could be adversely affected.
We have acquired businesses in the past as part of our strategic plan, and we intend to continue to pursue selective acquisitions to support our business strategy. These acquisitions involve a number of risks and challenges, which could cause significant operating inefficiencies and limit our growth and profitability. Such risks and challenges include:
• underperformance relative to our expectations and the price paid for the acquisition;
• unanticipated demands on our management and operational resources;
• failure to improve scalability;
• difficulty in integrating personnel, operations, and systems;
• retention of customers of the combined businesses;
• inability to maintain relationships with key customers, suppliers, and partners of an acquired business;
• assumption of contingent liabilities; and
• acquisition-related earnings charges.
Financing an acquisition could result in dilution from issuing equity securities, reduce our financial flexibility because of reductions in our cash balance, or result in a weaker balance sheet from incurring debt.
The benefits of an acquisition or an investment may take considerable time to develop. Certain acquisitions have not advanced our business strategy and have fallen short of expected returns on our investment. We have recorded impairment charges because our acquisitions were not successful and may record future impairment charges related to unsuccessful acquisitions. Our ability to continue to make acquisitions will depend upon our success at identifying suitable targets at acceptable prices, which requires substantial judgment in assessing their values, strengths, weaknesses, liabilities, and potential profitability, as well as the availability of capital.
Because we recognize revenue from subscriptions for our services over the term of the subscription, downturns or upturns in new business may not be immediately reflected in our operating results.
We recognize revenue from subscribers ratably over the terms of their subscription agreements, which are typically one year, but can range from one month to multiple years. As a result, most of the revenue we report in each period is the result of subscription agreements entered into during prior periods. Consequently, a decline in new
or renewed subscriptions in any one period may not be reflected in our revenue and operating results for that period. However, any such decline may undercut our revenue and operating results in future periods.
Our subscription model also makes it difficult for us to rapidly increase our revenue through additional sales in any period, as revenue from additional sales must be recognized over the applicable subscription term. By contrast, a significant portion of our operating costs are expensed as soon as a subscriber purchases a product. As a result, an increase in subscribers could result in recognition of more costs than revenue in the earlier portion of the subscription term. We may not attain sufficient revenue to maintain positive cash flow from operations or achieve profitability in any given period.
Our business, products, and facilities are at risk of a number of material disruptive events that our operational risk management and business continuity programs may not be adequate to address.
Our business and products are dependent on our ability to provide investment research, software applications, and other products and services on a current and time-sensitive basis. We rely on our computer systems and other network infrastructure, which are located across multiple facilities in the United States. Problems in our network systems may lead to cascading effects involving downtime, overloading of third-party data centers, and other issues that may affect our subscribers. We and our vendors are at risk of disruptions from numerous factors, including major weather events, fires, droughts, floods, earthquakes, volcanic activity, diseases, epidemics, pandemics, violent incidents, terrorist attacks, natural disasters, power loss, telecommunications, Internet, and other critical infrastructure failures, governmental actions, strikes and labor disturbances, riots, civil unrest, terrorism, war, political change, viruses, responses by various governments and the international community to any such acts, and other events beyond our control. Such events could cause in initiating or completing sales, our subscribers’ access to our products and services, or down client-facing and business processes, the travel of our personnel, dislocate our internal functions and personnel, and in general our ability to conduct normal business operations, any of which could our financial condition and operating results.
We, along with our third-party service providers, may modify, enhance, upgrade, and implement new systems, procedures, and controls to reflect changes in our business, technological advancements, and industry trends. Implementing new systems and integrating them with existing ones creates risks, such as the disruption of our electronic delivery systems, data management, and sales and service processes. If we, or our third-party service providers, do not successfully implement, maintain or expand these systems as planned, it could disrupt our operations and impair our ability to report and certify accurate and timely financial results.
Moreover, our proprietary information, intellectual property, or the personal information that we hold has been, and could be in the future, compromised or misappropriated, which may damage our reputation. These risks can limit our ability to:
• provide our comprehensive suite of research and software solutions, including our financial software and analytical tools;
• adequately protect our intellectual property; or
• achieve and maintain compliance with applicable laws, regulations and contracts.
We may also incur additional costs in relation to any new systems, procedures, and controls. We may require additional management attention to ensure an efficient integration, placing burdens on our internal resources.
Most of our products and services depend on our electronic delivery systems and the Internet. Our ability to deliver information using the Internet may be impaired by infrastructure failures, disruptions, or outages in our systems or those of our third-party service providers or Internet providers.
We are also subject to potential shortcomings in our own business resilience practices, such as failures to fully understand dependencies between different business processes across the locations at which they are performed, inadequate vendor risk-assessment and management processes and critical vendor dependencies, concentration of
certain critical activities in areas of geopolitical risk or with “single point of failure” employees or employee groups, and possibly ineffective location recovery strategies in the event of a location disruption.
Disruptions to our third-party technology providers and management systems could harm our business and lead to loss of subscribers.
We depend on third-party technology providers and management systems to distribute our content and process transactions. We exercise no control over our third-party vendors or the infrastructure under which they operate. We are vulnerable to any errors, interruptions, or delays in their operations. Any disruption in the services provided by these vendors or their inability to keep up with our growing demands for capacity could harm our business reputation, customer relations, and operating results. Upon expiration or termination of any of our agreements with third-party vendors, we may not be able to replace the services provided to us in a timely manner or at all, or on terms and conditions, including service levels and cost, that are favorable to us. A transition from one vendor to another vendor could subject us to operational delays and inefficiencies until the transition is complete.
Moreover, our third-party technology providers may disagree with, or choose to take a public stance against, the editorial content produced by certain of our operating brands, or otherwise decide to cease providing services to us. This may result in, among other things, disruption in our operations, copycat behavior by other of our vendors, difficulty retaining or attracting employees, or negative media attention.
We may require additional capital to support business growth, and such capital might not be available on acceptable terms, if at all.
We intend to continue to make investments to support our business growth and may require additional funds to respond to business challenges, including the need to develop new features and products or enhance our existing services, improve our operating infrastructure, or acquire complementary businesses and products. Accordingly, we may need to raise money through equity or debt financings. Issuances of equity or convertible debt securities could dilute our existing stockholders. Any new equity securities we issue could also have rights, preferences, and privileges superior to those of holders of Class A common stock. Debt financing could involve covenants that restrict subsequent efforts to raise capital.. We may not be able to obtain additional financing on terms favorable to us, if at all. If we are unable to obtain adequate financing or financing on terms satisfactory to us when we require it, our ability to continue to support our business growth and to respond to business challenges could be impaired.
We are subject to payment processing risk.
Our subscribers pay for our services using a variety of different payment methods, including credit and debit cards, prepaid gift cards, and direct debit. We rely on internal systems, as well as those of third parties, to process payments. Acceptance and processing of these payment methods are subject to rules and regulations, including additional authentication requirements for some payment methods. They also require payment of interchange and other fees, which may increase over time and raise our operating costs and lower our profit margins. For example, we have in the past experienced higher transaction fees from our third-party processors as a result of chargebacks on credit card transactions. Changing terms and conditions by credit card companies may result in the way we accept payments being deemed non-compliant and potentially cause us to be suspended or terminated by our payment processors.
Our revenues, operating expenses, and results of operations could be weakened by:
• increases in payment processing fees or the cash reserves required by third party payment processors,
• material changes in the payment ecosystem, such as large re-issuances of payment cards,
• changes in public perception and confidence in the payment systems we are utilizing,
• delays in receiving payments from payment processors,
• changes to rules or regulations concerning payments,
• loss of payment partners, and/or
• disruptions or failures in our payment processing systems, partner systems, or payment products, including products we use to update payment information.
In addition, from time to time, we encounter fraudulent use of payment methods, which could impact our results of operations and, if not adequately controlled and managed, could create negative consumer perceptions of our products and services. If we are unable to maintain our fraud and chargeback rate at acceptable levels, card networks may impose fines and/or reserves, our card approval rate may be impacted, and we may be subject to additional card authentication requirements. The termination of our ability to process payments on any major payment method would significantly impair our ability to operate our business.
Risks Related to Legal and Regulatory Matters
Failure to comply with federal and state securities laws and regulations, or other regulatory action or investigations, could harm our business.
Various aspects of our business and services are subject to federal, state, and local regulation, as well as regulation outside the United States. We rely upon the “publisher’s exclusion” from the definition of “investment adviser” under Section 202(a)(11)(D) of the Investment Advisers Act of 1940, as amended (the “Advisers Act”), and corresponding state securities laws for our investment newsletter business. In order to maintain our qualification for this exclusion, our newsletter publications must be: (1) of a general and impersonal nature, in that the advice provided is not adapted to any specific portfolio or any client’s particular needs; (2) “bona fide” or genuine, in that it contains disinterested commentary and analysis as opposed to promotional material; and (3) of general and regular circulation, in that it is not timed to specific market activity or to events affecting, or having the ability to affect, the securities industry. The United States Supreme Court in Lowe v. Securities and Exchange Commission , 472 U.S. 181 (1985), held that a publisher of advice concerning securities, even where that advice consisted of specific recommendations to buy, sell, or hold particular securities, is entitled to rely on the publisher’s exclusion where the publisher does not offer individualized advice tailored to any specific portfolio or to any client’s particular needs. As long as communications between the publisher and its subscribers remain entirely impersonal and do not develop into the kind of fiduciary relationships that are characteristic of investment adviser-client relationships, the Lowe court held that such products and publications presumptively fall within the exclusion and thus the publisher is not subject to registration under the Advisers Act.
We believe our provision of financial research products meets the requirements of the publisher’s exclusion. The financial research products we offer to our clients are of a general and impersonal nature and are not individualized or tailored to any client’s particular needs. We do not collect any investor suitability information, nor do we perform any suitability analysis. The products are marketed to the general public and do not reflect any fiduciary or person-to-person relationships that are characteristic of investment adviser-client relationships. Our financial research offerings are genuine publications, providing disinterested and impersonal commentary and analysis to our subscribers. We are not compensated by the sponsors or distributors of any investment products highlighted in our publications. We publish our research reports on a routine or periodic basis, and publication is not timed to specific market activity or to events affecting or having the ability to affect the securities industry. The publication frequency of our newsletters varies, though newsletters are generally published on a monthly basis.
If we change our business practices in such a way as to not satisfy the publisher’s exclusion, or otherwise fail to comply with the regulatory requirements concerning this exclusion, we may face civil and/or criminal penalties as an unregistered investment adviser or other consequences that could damage our business.
If we are deemed an “investment adviser” and eligible for the “publisher’s exclusion,” we would have to register as an investment adviser with the SEC and potentially with one or more states under similar state laws. Registration requirements for investment advisers are burdensome and costly. Under the Advisers Act and corresponding state laws, we would take on (i) fiduciary duties to clients; (ii) substantive prohibitions and requirements; (iii) contractual requirements; (iv) record-keeping requirements; and (v) administrative oversight by the SEC, primarily by inspection. If we are required to register under these laws, we may no longer be able to
continue to offer our investment research services, which may have a significant adverse impact on our business and results of operations.
We could face liability for the information and data we collect and distribute or the reports and other documents produced by our software products.
We may be subject to claims for securities law violations, defamation (including libel and slander), negligence, or other claims relating to the information we publish, including our research. For example, investors may take legal action against us if they rely on published information that contains an error, or a company may claim that we have made a defamatory statement about it or its employees.
We rely on a variety of outside sources for the information we use in our published material. These sources include securities exchanges and other data providers. We also incorporate data from a variety of third-party sources. Accordingly, in addition to possible exposure for publishing incorrect information that results directly from our own errors, we could face liability based on inaccurate data provided to us by others.
We could be subject to claims by providers of publicly available data and information, which we compile from websites and other sources, alleging that we have improperly obtained that data in violation of the source’s copyrights or terms of use. Additionally, we could be subject to claims based on legislation that limits the personal information we can collect from and about individuals. We could also be subject to claims from third parties, such as securities exchanges, from which we license and redistribute data and information, alleging that we have used or redistributed the data or information in ways not permitted by our license rights, or that we have inadequately permitted our subscribers to use such data. The agreements with such exchanges and other data providers give them extensive data use audit rights, and such audits can be expensive and time consuming and potentially result in substantial fines. Defending claims based on the information we publish could be expensive and time-consuming and could our business, operating results, and financial condition.
We may not adequately protect or enforce our own intellectual property and may incur costs to defend against, or face liability for, intellectual property infringement claims (or related claims) of others.
To protect our intellectual property, we rely on a combination of trademarks, copyrights, confidentiality agreements, and various other contractual arrangements with our employees, affiliates, customers, strategic partners, and others. We own several trademark registrations and copyright registrations, and have pending trademark applications, including in the United States and Canada. We may seek additional trademark, patent, and other intellectual property filings, which could be expensive and time-consuming. These trademarks, patents, and other registered intellectual property rights may not be granted and, even if they are, it could be expensive to maintain these rights and the costs of defending our rights could be substantial.
Our code of conduct, employee handbook, and other internal policies seek to protect our intellectual property against misappropriation, infringement, and unfair competition. We also utilize various tools to police the Internet to monitor piracy and unauthorized use of our content. In addition, whether we grant access to our intellectual property via contract or license third-party content and/or technology, we incorporate contractual provisions to protect our intellectual property and seek indemnification for any third-party infringement claims.
However, we cannot provide any guarantee that the foregoing provisions will be honored by or enforceable against the counterparties to such arrangements. Nor can we guarantee they will be adequate to protect us from third-party claims, suits, government investigations, and other proceedings involving alleged violation of third-party intellectual property rights. Similarly, we cannot ensure these provisions will prevent the theft of our intellectual property, as we may be unable to detect the unauthorized use of or take appropriate steps to enforce our intellectual property rights. Our intellectual property rights may not survive a legal challenge to their validity or provide significant protection for us. In addition, our ability to enforce and protect our intellectual property rights may be limited in certain countries outside the United States because of the differences in foreign laws that could make it easier for competitors to capture a market position by using technologies and products that are similar to those developed, owned by, or licensed to us. to protect our intellectual property could our brand, our proprietary content, and limit our ability to compete effectively. Further, any , even if not , could result in the expenditure of significant financial and managerial resources on our part,
which could hurt our business, results of operations, and financial condition. In addition, the various agreements, policies, procedures, and contractual provisions that we rely on to protect our proprietary rights do not prevent our competitors from independently developing technologies that are substantially equivalent or superior to those contained in our products and services. Although we have generally taken measures to protect our proprietary rights, there can be no assurance that others will not offer products or concepts that are substantially similar to ours and compete with our business.
The software and Internet industries involve a large number of patents, trademarks, and copyrights. The industries are fraught with litigation based on allegations of infringement, misappropriation, dilution, conflict with, or other violations of intellectual property rights. In addition, various “non-practicing entities” that own patents and other intellectual property rights often attempt to aggressively assert their rights in order to extract value from providers of software products or services. From time to time, we may introduce or acquire new products, including in areas where we historically have not competed, which could increase our exposure to patent and other intellectual property claims from competitors and non-practicing entities.
We have been subject to claims in the past by third parties alleging infringement, misappropriation, dilution, or violation of, or conflict with, their intellectual property rights and other related claims. Such claims can also be alleged against clients, customers, or distributors of our products or services whom we have agreed to indemnify against third-party claims of infringement. The defense of such claims can be costly and consume valuable management time and attention. We could lose such a case or be to settle on terms. In either case, we could be forces to pay , enter into royalty or licensing arrangements, or redesign or stop offering the affected products or services. Such and could our business, financial condition, or results of operations.
Our database and network facilities, and those of our third-party service providers, could fail, become unavailable, or otherwise inadequate, and are subject to cybersecurity risks. Failures of our internal security measures or breach of our privacy protections could cause us to lose subscribers and subject us to liability.
Our database and network facilities, and those of our third-party service providers, are vulnerable to attempted cybersecurity attacks that may take a variety of forms, including, infrastructure, botnets, malicious file attacks, cross-site scripting, credential abuse, ransomware, bugs, viruses, worms, malicious software programs, and denial of service attack. These attacks could lead to misappropriation of our data, corruption of our databases, or limitation of access to our information systems. To defend against these threats, we have a series of controls focusing on both prevention and detection, including firewalls, intrusion detection systems, automated scanning and testing, server hardening, antivirus software, training, and patch management. We cannot guarantee that these efforts will work as planned. We make significant investments in servers, storage, and other network infrastructure to prevent such , but cannot guarantee that these efforts will work as planned.
These cybersecurity incidents or other significant disruptions could be caused by persons inside our organization, persons outside our organization with authorized access to systems inside our organization, or by individuals outside our organization. Although the cybersecurity incidents that we have experienced to date, as well as those reported to us by our third-party partners, have not had a material effect on our business, financial condition or results of operations, they could be more damaging in the future.
Our business requires that we securely collect, process, store, transmit, and dispose of confidential information relating to our operations, subscribers, employees, and other third parties. We collect Paid Subscribers’ information including name, mailing address, phone number, email address, and credit card information (collectively “personal information”), which we use to administer our services. We also collect the Free Subscribers (as defined below) . Additionally, we rely on security and authentication technology licensed from third parties to perform real-time credit card authorization and verification. At times, we also rely on third parties, including technology consulting firms, to help protect our infrastructure from security threats.
However, despite our investments, these measures do not guarantee absolute security, and improper access to or release of confidential information has occurred in the past. Any cybersecurity incident could result in the loss or destruction of, inaccessibility or unauthorized access to, or use, alteration, disclosure, or acquisition of, data. Such
incidents could also result in damage to our reputation, litigation, regulatory investigations, or other liabilities. These attacks may come from individual hackers, criminal groups, and/or state-sponsored organizations.
We have suffered in the past, and may in the future suffer, malicious attacks by individuals or groups (including criminal groups and those sponsored by nation-states, terrorist organizations, or global corporations seeking to illicitly obtain technology or other intellectual property) seeking to attack our products and services or penetrate our network infrastructure to gain access to confidential information, including personal information, or to launch or coordinate distributed denial of service attacks. While we have dedicated resources intended to maintain appropriate levels of cybersecurity and implemented systems and processes intended to help identify cyberattacks and protect our network infrastructure, these attacks have become increasingly frequent, sophisticated, and difficult to detect, and often are not detected until after they have been launched against a target. We may be unable to anticipate these attacks or implement sufficient preventative measures, and we therefore cannot you that our preventative measures will be in compromise and/or of our information technology systems and related data. We furthermore cannot be certain that our remedial measures will fully mitigate the financial consequences of any cyber-attack or .
Recent well-publicized security breaches at other companies have led to further enhanced government and regulatory scrutiny of the measures taken by companies to protect against cyberattacks. It may in the future result in heightened cybersecurity requirements, including the implementation of more robust internal measures and additional regulatory expectations for oversight of customers, vendors, and service providers. Our information technology systems interact with those of customers, vendors, and service providers. Our contracts with those parties typically require them to implement and maintain adequate security controls, but we may not have the ability to effectively monitor the security measures of all our third-parties to meet such additional regulatory expectations.
Additionally, we engage third-party vendors and service providers to store and process some of our customers’ personal information. Those vendors may be the targets of cyberattacks. Our ability to monitor our vendors’ and service providers’ data security is limited, and, in any event, attackers may be able to circumvent those security measures, resulting in the theft and misuse of our and our customers’ data.
If our security measures are breached and, as a result, someone obtains unauthorized access to our data, our reputation may be damaged, our business may suffer, and we could incur significant liability. Even the perception of inadequate security may damage our reputation and hurt our ability to win new customers and retain and receive timely payments from existing customers. In addition, we could be subject to private litigation and actions from government regulators, which could cost a lot to defend and/or result in significant penalties and reputational damage. Finally, we could be required to expend significant capital and other resources to address any data security incident or breach, which may not be covered or fully covered by our insurance and which may involve payments for , forensic analyses, legal advice, public relations advice, system repair or replacement, or other services.
We are subject to laws, regulations, and industry standards related to data privacy, data protection, and information security, including industry requirements such as the Payment Card Industry Data Security Standard. Our actual or perceived failure to comply with such obligations could harm our business.
Our products and websites collect, store, process, and transmit personal information about individuals, including personally identifiable information and personal financial information such as credit card information. We are subject to various laws and regulations relating to data privacy, data protection, and information security. Such laws and regulations restrict and set standards for how personal information is collected, processed, stored, used, and disclosed. These laws and regulations mandate security requirements, implement notice requirements regarding privacy practices, and provide individuals with rights regarding the maintenance, use, disclosure, and sale of their protected personal information. Laws across all 50 U.S. states and in countries around the world also require notifications to customers, regulators, credit reporting agencies, or other third parties when certain sensitive information has been compromised as a result of a security breach. If we are found to have breached any such laws, regulations, or industry standards, we may be subject to enforcement actions that require us to change our business practices in ways that may cut into our revenue. That could also expose us to litigation, fines, regulatory enforcement, injunctive orders to or change our data processing activities, civil and/or , and
adverse publicity that could cause our customers to lose trust in us, negatively impacting our reputation and business in a manner that harms our financial position.
Our compliance with these changing, increasingly burdensome, and sometimes conflicting regulations and requirements may cause us to incur substantial costs or require us to change our business practices. If we fail to comply with these regulations or requirements, we may be exposed to litigation expenses and possible significant liability, fees, or fines. We cannot fully predict the impact of any federal and state data privacy laws, including those that are still in draft form, and their subsequent guidance, regulations, or rules on our business or operations, but it may increase our compliance costs and potential liability, particularly in the event of a data breach, and could have a material adverse effect on our business, including how we use personal information, our financial condition, and the results of our operations or prospects.
We are also subject to payment card association operating rules, certification requirements, and rules governing electronic funds transfers. This includes the Payment Card Industry Data Security Standard (the “PCI DSS”), a security standard applicable to companies that collect, store, or transmit certain credit and debit card data. Under the PCI DSS and our contracts with our card processors, if a breach of payment card information that we store could make us liable to the banks that issue the payment cards for their related expenses and penalties. Even if our customer data is never compromised, failure to follow payment card industry data security standards could subject us to significant fines, have significant reserves imposed on our accounts, or lose our ability to give our customers the option of using payment cards. Being unable to accept payment cards would cause significant damage to our business.
Laws in countries outside of the United States create significant compliance obligations and liability. For example, the European Union General Data Protection Regulation (Regulation 2016/679) and applicable national supplementing laws and the UK data protection regime consisting primarily of the UK General Data Protection Regulation and the UK Data Protection Act 2018 (together referred to as the “GDPR”) may create an ongoing compliance commitment and substantial costs in relation to our use of personal data. Ensuring compliance with the GDPR could involve substantial costs. Despite our efforts, competent authorities or third parties may assert that our business practices fail to comply. If our operations are found to be in violation of the GDPR, we may be required to change our business practices and/or be subject to significant civil penalties, regulatory enforcement, business disruption, and reputational harm, any of which could have a material adverse effect on our business. If we or our vendors fail to comply with the GDPR and the EU’s national data protection laws, we may face regulatory enforcement actions, which can result in significant monetary and other administrative .
We are also subject to evolving EU and UK privacy laws on cookies, tracking technologies, and e-marketing practices. Recent European court decisions and regulators’ recent decisions and guidance have increased attention on these technologies. If enforcement continues increasing, this could increase our liability exposure and lead to substantial costs. It could also require significant systems changes, limit the effectiveness of our marketing activities, and divert the attention of our technology personnel. Those changes could shrink our margins, increase costs, and subject us to additional liabilities. It may lead to broader restrictions and impairments on our marketing activities and hinder our efforts to understand users.
As we continue to expand into other foreign countries and jurisdictions, we may also be subject to additional laws and regulations that may affect how we conduct business.
We make disclosures and statements regarding our use of personal information through our privacy policies and statements on our products and websites as required by privacy or data protection regulations. Failure (or perceived failure) to comply with our public statements or to adequately disclose our privacy or data protection practices could result in costly investigations by governmental authorities, litigation, and fines, as well as reputational damage and customer loss, which could have material impacts on our revenue and operations.
We also from time to time acquire other companies that collect and process personal information. While we perform due diligence on the technology systems of these companies, we can offer no assurances that such companies have not suffered data breaches or system intrusions prior to or after our acquisition for which we may be liable.
We maintain insurance coverage to protect us against cybersecurity and data-protection risks. But our coverage may not be sufficient to cover all or the majority of the costs, losses, or claims. Our insurance covers reimbursement for lost net profits or increased net loss of profits resulting from adverse publicity related to an actual or alleged network impairment or privacy breach. While it does not cover the costs for improvements to our systems, it does cover costs to restore our system operations.
Compliance with ever-evolving federal and state laws relating to consumer protection and communication privacy laws, and any failure by us to comply may result in significant liability, negative publicity, and/or an erosion of trust, which could materially adversely affect our business, results of operations, and financial condition.
Laws, regulations, and standards covering marketing, advertising, and other activities conducted by telephone, email, mobile devices, and the internet may be or become applicable to our business. Those laws include the Telephone Consumer Protection Act (the “TCPA”), the Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003 (the “CAN-SPAM Act”), and similar state consumer protection and communication privacy laws, such as California’s Invasion of Privacy Act.
We use a broad mix of marketing programs and platforms to promote our services and content to current and prospective subscribers. Two of our primary means of communicating with our subscribers has been via email and text messages. Actual or perceived improper sending of such email or text messaging communications may subject us to liabilities or claims relating to consumer protection laws. We strive to ensure that all our marketing communications comply with the requirements set forth in the TCPA and CAN-SPAM Act. However, violations could result in the Federal Communications Commission (FCC) and FTC, respectively, seeking civil penalties against us. Numerous class-action suits under federal and state laws have been filed in recent years against companies who conduct email marketing, telemarketing and/or SMS texting programs. Many have resulted in multimillion-dollar settlements to the plaintiffs. Any current or future such litigation against us could be costly and time-consuming to .
In recent years, consumer protection regulations, particularly in connection with marketing on the Internet and consumer privacy, have become more aggressive. We expect governments at all levels to continue enacting new laws and regulations. In addition, financial publishers and investment newsletters face extensive regulatory scrutiny because of concerns over schemes involving touting, front running, “pumping and dumping,” scalping, undisclosed conflicts of interest, deceptive marketing, and false performance claims and testimonials. Any new legislation and enhanced scrutiny, alone or combined with increasingly aggressive enforcement of existing laws, could make compliance more difficult and expensive. In addition, we have been, and may continue to be, the subject of requests from or investigations by state and federal regulatory bodies. We may be subject to continued or increased regulatory scrutiny. Any of the foregoing could be to our business, results of operations, and financial condition.
Adverse litigation judgments or settlements resulting from legal proceedings relating to our business operations could materially adversely affect our business, results of operations, and financial condition.
From time to time, we are subject to allegations and have been party to legal claims and regulatory proceedings relating to our business operations. Such claims may include defamation, libel, intellectual property infringement, securities law violations, misappropriation, dilution, violation, fraud or negligence, or other theories of liability, in each case relating to the articles, commentary, investment recommendations, or other information we provide through our services. Such allegations, claims, and proceedings may be brought by third parties, including customers, partners, employees, governmental or regulatory bodies, or competitors, and may include class actions.
Defending against such claims and proceedings is costly and time consuming and may divert management’s attention and personnel resources from our normal business operations. The outcome of many of these claims and proceedings cannot be predicted. Any claims asserted against us regardless of merit or eventual outcome may harm our reputation. Our insurance or indemnities may not cover all claims. Any judgment, fine, settlement, or injunctive relief against us could damage our business, results of operations, and financial condition.
Our use of artificial intelligence technologies may not be successful and may present business, compliance, and reputational risks .
We are increasing our use of machine learning and Artificial Intelligence (“AI”) technologies into certain of our products and processes. If other firms incorporate AI technologies into their products and offerings more effectively than we do, or if we otherwise fail to keep pace with rapidly evolving AI technological developments, our competitive position and business results may suffer.
At the same time, use of AI has become the source of significant media attention and political debate. The introduction of AI technologies, particularly generative AI, into new or existing offerings may result in new or expanded risks and liabilities, including due to enhanced governmental or regulatory scrutiny, litigation, compliance issues, ethical concerns, confidentiality or security risks, as well as other factors that could adversely affect our business, reputation, and financial results. For example, AI technologies can lead to unintended consequences, including generating content that appears correct but is factually inaccurate, misleading or otherwise flawed, or that results in unintended biases and discriminatory outcomes, which could harm our reputation and business and expose us to liability. We may also not identify inaccurate information, which may us to liability. If the content, analyses, or recommendations that AI applications assist in producing are, or are to be, , , , , biased, discriminatory or otherwise , any of which may not be detectable, our business and reputation may be affected. Laws, regulations or industry standards that develop in response to the use of AI may be or may significantly restrict the deployment of AI, particularly generative AI technologies, in our products or processes.
We use AI technologies from third parties, which may include open-source software. If we are unable to maintain rights to use these AI technologies on commercially reasonable terms, we may be forced to acquire or develop alternate AI technologies. That could limit or delay our ability to provide competitive offerings and may increase our costs. These AI technologies also may incorporate data from third-party sources, which may expose us to risks associated with data rights and protection. Courts and regulators have not fully addressed intellectual property ownership and license rights surrounding AI technologies. Nor have they dealt with data protection laws related to the use and development of AI. The use or adoption of AI technologies into our products may result in exposure to claims by third parties of copyright infringement or other intellectual property misappropriation, which may require us to pay compensation or license fees to third parties. The evolving legal, regulatory and compliance framework for AI technologies may also impact our ability to protect our own data and intellectual property against .
Use of AI technologies may also increase risks related to cyberattacks or other security incidents or result in a failure to protect confidential information. Because AI technology is highly complex and rapidly developing, it is not possible to predict all of the legal, operational or technological risks that may arise relating to our use of AI.
Our failure to comply with the anti-corruption, trade compliance, and economic sanctions laws and regulations of the United States and applicable international jurisdictions could materially adversely affect our reputation and results of operations.
We must comply with anti-corruption laws and regulations imposed by governments around the world with jurisdiction over our operations, which include the U.S. Foreign Corrupt Practices Act of 1977 (the “FCPA”) and the U.K. Bribery Act 2010 (the “Bribery Act”), as well as the laws other countries where we do business. These laws and regulations apply to companies, individual directors, officers, employees, and agents, and may restrict our operations, trade practices, investment decisions, and partnering activities. The FCPA and the Bribery Act prohibit us from corruptly offering, promising, authorizing, or providing anything of value to public officials for the purposes of influencing official decisions or obtaining or retaining business or otherwise obtaining favorable treatment. The Bribery Act also prohibits non-governmental “commercial” bribery and accepting bribes. As part of our business, we may deal with governments and state-owned business enterprises, the employees and representatives of which may be considered public officials for purposes of the FCPA and the Act. We are also subject to the jurisdiction of various governments and regulatory agencies around the world, which may bring our personnel and agents into contact with public officials responsible for issuing or renewing permits, licenses, or approvals or for enforcing other governmental regulations. In addition, some of the international locations in which we operate a
developed legal system and have elevated levels of corruption. Despite our compliance efforts and activities, we cannot assure compliance by our employees or representatives. Any violation could harm our reputation, business, financial condition, and results of operations.
Our business also must be conducted in compliance with applicable economic sanctions laws and regulations, such as laws administered by the U.S. Department of the Treasury’s Office of Foreign Assets Control, the U.S. Department of State, the U.S. Department of Commerce, the United Nations Security Council, and other relevant sanctioning authorities. Our operations expose us to the risk of violating, or being accused of violating, anti-corruption, trade compliance, and economic sanctions laws and regulations. Those risks may be heightened as we continue to expand globally. Our failure to successfully comply with these laws and regulations may expose us to reputational harm and significant sanctions, including criminal fines, imprisonment, civil penalties, disgorgement of profits, , and from government contracts. of can be expensive and . our compliance efforts and activities, we cannot compliance by our employees or representatives. Any could our reputation, business, financial condition, and results of operations.
Changes in our income tax payments or adverse outcomes resulting from examination of our income or other tax returns or changes in legislation could hurt our business, financial condition, and results of operations.
Income tax payouts are subject to volatility. Among the factors that could cause them to rise are:
• earnings differing materially from our projections;
• changes in the valuation of our deferred tax assets and liabilities;
• changes in the expected timing and amount of the release of any tax valuation allowances;
• the effects of share-based compensation;
• the outcomes as a result of tax examinations; or
• changes in tax laws, regulations, accounting principles.
Any of these factors could harm our operating results. Significant judgment is required to determine the recognition and measurement attribute prescribed in GAAP relating to accounting for income taxes. In addition, we are subject to examinations of our income tax returns by the U.S. Internal Revenue Service (the “IRS”) and other tax authorities. We assess the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of our provision for income taxes. The outcomes from these examinations may have an adverse effect on our business, financial condition, and results of operations.
Risks Related to Our Organizational Structure
MarketWise, Inc.’s sole material asset is its interest in MarketWise, LLC, and, accordingly, it will depend on distributions from MarketWise, LLC to pay its taxes and expenses, including payments under the Tax Receivable Agreement. MarketWise, LLC’s ability to make such distributions may be subject to various limitations and restrictions. In certain circumstances, tax distributions payable to MarketWise, Inc. may be substantial and in excess of its tax liabilities and obligations under the Tax Receivable Agreement. To the extent that MarketWise, Inc. does not distribute such excess cash, MarketWise Members would benefit from any value attributable to such cash balances as a result of their ownership of Class A common stock following an exchange of their LLC Units.
MarketWise, Inc. is a holding company and has no material assets other than its equity interest in MarketWise, LLC. As such, MarketWise, Inc. has no independent means of generating revenue or cash flow, and its ability to pay taxes and operating expenses or declare and pay dividends in the future, if any, will be dependent upon the financial results and cash flows of MarketWise, LLC and its subsidiaries, and distributions MarketWise, Inc. receives from MarketWise, LLC. There can be no assurance that MarketWise, LLC and its subsidiaries will generate sufficient cash flow to distribute funds to MarketWise, Inc., or that applicable state law and contractual restrictions, including negative covenants in any debt agreements of MarketWise, LLC or its subsidiaries, will permit such distributions.
Moreover, MarketWise, Inc. also incurs expenses related to its operations, including payments under the Tax Receivables Agreement, which could be substantial. Because MarketWise, Inc. has no independent means of generating revenue, MarketWise, Inc.’s ability to make tax payments and payments under the Tax Receivable Agreement is dependent on the ability of MarketWise, LLC to make distributions to MarketWise, Inc. in an amount sufficient to cover MarketWise, Inc.’s tax obligations and obligations under the Tax Receivables Agreement.
MarketWise, LLC is treated as a partnership for U.S. federal income tax purposes and, as such, generally will not be subject to any entity-level U.S. federal income tax. Instead, taxable income will be allocated to its equity holders, including MarketWise, Inc. Accordingly, MarketWise, Inc. will incur income taxes on its allocable share of any net taxable income of MarketWise, LLC. Under the terms of the Third Amended and Restated Limited Liability Company Operating Agreement of MarketWise, LLC (the “MarketWise Operating Agreement”), MarketWise, LLC is obligated to make tax distributions to owners of the common units issued by MarketWise, LLC (“LLC Units”), including MarketWise, Inc. MarketWise, Inc. intends, as MarketWise, LLC’s sole manager, to cause MarketWise, LLC to make cash distributions to the owners of LLC Units in an amount sufficient to (i) fund all or part of such owners’ tax obligations in respect of taxable income allocated to such owners and (ii) cover MarketWise, Inc.’s operating expenses, including payments under the Tax Receivable Agreement. However, MarketWise, LLC’s ability to make such distributions may be subject to various limitations and restrictions, such as restrictions on distributions under contracts or agreements to which MarketWise, LLC is then a party. Additionally, any distribution that would render MarketWise, LLC insolvent would be restricted. If MarketWise, Inc. does not have sufficient funds to pay tax or other liabilities or to fund our operations, it may have to borrow funds, which could materially affect its liquidity and financial condition and subject MarketWise, Inc. to various restrictions imposed by any such lenders.
As a result of (i) potential differences in the amount of net taxable income allocable to the MarketWise Members, (ii) the lower tax rates currently applicable to corporations as opposed to individuals, and (iii) the favorable tax benefits that MarketWise, Inc. anticipates from any redemptions or exchanges of LLC Units for its Class A common stock or cash pursuant to the MarketWise Operating Agreement in the future, tax distributions payable to MarketWise, Inc. may be in amounts that exceed its actual tax liabilities and obligations to make payments under the Tax Receivable Agreement with respect to the relevant taxable year. MarketWise, Inc.’s board of directors (“Board”) will determine the appropriate uses for any excess cash so accumulated, which may include, among other uses, the payment of other expenses or dividends on MarketWise, Inc.’s stock, although MarketWise, Inc. will have no obligation to distribute such cash (or other available cash) to its stockholders. MarketWise, Inc. has declared special dividends to Class A shareholders to distribute excess tax distributions received from MarketWise, LLC. Except as otherwise determined by MarketWise, Inc. as the sole manager of MarketWise, LLC, there is no adjustment to the exchange ratio for LLC Units and corresponding shares of our Class A common stock as a result of any cash distributions or any retention of cash by MarketWise, Inc. To the extent MarketWise, Inc. does not distribute such excess cash as dividends on its Class A common stock, it may take other actions with respect to such excess cash—for example, holding such excess cash or lending it (or a portion thereof) to MarketWise, LLC, which may result in shares of our Class A common stock increasing in value relative to the value of the LLC Units. The MarketWise Members may from any value attributable to such cash balances if they acquire shares of our Class A common stock in exchange for their LLC Units, notwithstanding that such holders may previously have participated in distributions by MarketWise, LLC as holders of the LLC Units that resulted in such excess cash balances held by MarketWise, Inc.
The Tax Receivable Agreement requires MarketWise, Inc. to make cash payments to the MarketWise Members in respect of certain tax benefits to which MarketWise, Inc. may become entitled, and no such payments will be made to any holders of our Class A common stock unless such holders are also MarketWise Members. The payments MarketWise, Inc. will be required to make under the Tax Receivable Agreement may be substantial.
MarketWise, Inc. is a party to the Tax Receivable Agreement with the MarketWise Members and MarketWise, LLC. Under the Tax Receivable Agreement, MarketWise, Inc. generally is required to make cash payments to the MarketWise Members equal to 85% of the tax benefits, if any, that MarketWise, Inc. actually realizes, or in certain circumstances is deemed to realize, as a result of (1) the increases in the tax basis of assets of MarketWise, LLC resulting from any redemptions or exchanges of LLC Units for our Class A common stock or cash by the MarketWise Members pursuant to the MarketWise Operating Agreement, or certain distributions (or deemed distributions) by MarketWise, LLC and (2) certain other tax benefits arising from payments under the Tax
Receivable Agreement. No such payments will be made to any holders of our Class A common stock unless such holders are also MarketWise Members.
The payment obligations under the Tax Receivable Agreement are MarketWise, Inc.’s obligations and not the obligations of MarketWise, LLC, and the amount of the cash payments that MarketWise, Inc. will be required to make under the Tax Receivable Agreement may be substantial. Any payments made by MarketWise, Inc. to the MarketWise Members under the Tax Receivable Agreement will not be available for reinvestment in the business and will generally reduce the amount of cash that might have otherwise been available to MarketWise, Inc. and its subsidiaries. To the extent MarketWise, Inc. is unable to make timely payments under the Tax Receivable Agreement for any reason, the unpaid amounts will be deferred and will accrue interest until paid. Furthermore, MarketWise, Inc.’s future obligations to make payments under the Tax Receivable Agreement could make MarketWise, Inc. and its subsidiaries a less attractive target for an acquisition, particularly in the case of an acquirer that cannot use some or all of the tax benefits that are the subject of the Tax Receivable Agreement. Payments under the Tax Receivable Agreement are not conditioned on the MarketWise Members’ continued ownership of LLC Units or our Class A common stock or our Class B common stock.
MarketWise, Inc.’s failure to make any payment required under the Tax Receivable Agreement (including any accrued and unpaid interest) within 90 calendar days of the date on which the payment is required to be made will constitute a material breach of a material obligation under the Tax Receivable Agreement, which will terminate the Tax Receivable Agreement and accelerate future payments thereunder, unless the applicable payment is not made because (i) MarketWise, Inc. is prohibited from making such payment under the terms of the Tax Receivable Agreement or the terms governing certain of its indebtedness or (ii) MarketWise, Inc. does not have, and despite using commercially reasonable efforts cannot obtain, sufficient funds to make such payment.
Estimating the amount and timing of MarketWise, Inc.’s realization of tax benefits subject to the Tax Receivable Agreement is by its nature imprecise. The actual increases in tax basis, as well as the amount and timing of MarketWise, Inc.’s ability to use any deductions (or decreases in gain or increases in loss) arising from such increases in tax basis, as dependent upon significant future events, including the timing of redemptions or exchanges by the MarketWise Members; the price of MarketWise, Inc. Class A common stock at the time of any exchange; the extent to which such exchanges are taxable; the depreciation and amortization periods that apply to the increase in tax basis; the amount of gain recognized by the MarketWise Members; the amount, character and timing of taxable income MarketWise, Inc. generates in the future; the timing and amount of any earlier payments that MarketWise, Inc. may have made under the Tax Receivable Agreement; the tax rates and laws then applicable; and the portion of MarketWise, Inc.’s payments under the Tax Receivable Agreement that constitute imputed interest or give rise to depreciable or amortizable tax basis. Accordingly, estimating the amount and timing of payments that may become due under the Tax Receivable Agreement is also by its nature imprecise and dependent upon significant future events, including those noted above in respect of estimating the amount and timing of MarketWise, Inc.’s realization of tax benefits.
In certain cases, future payments under the Tax Receivable Agreement to the MarketWise Members may be accelerated or significantly exceed the actual benefits MarketWise, Inc. realizes in respect of the tax attributes subject to the Tax Receivable Agreement.
The Tax Receivable Agreement provides that if (i) MarketWise, Inc. materially breaches any of its material obligations under the Tax Receivable Agreement, (ii) certain mergers, asset sales, other forms of business combinations, or other changes of control were to occur, or (iii) MarketWise, Inc. elects an early termination of the Tax Receivable Agreement, then MarketWise, Inc.’s future obligations, or its successor’s future obligations, under the Tax Receivable Agreement to make payments thereunder would accelerate and become due and payable, based on certain assumptions, including an assumption that MarketWise, Inc. would have sufficient taxable income to fully utilize all potential future tax benefits that are subject to the Tax Receivable Agreement, and an assumption that, as of the effective date of the acceleration, any MarketWise Member that has LLC Units not yet exchanged shall be deemed to have exchanged such LLC Units on such date, even if MarketWise, Inc. does not receive the corresponding tax benefits until a later date when the LLC Units are actually exchanged.
As a result of the foregoing, MarketWise, Inc. would be required to make an immediate cash payment equal to the estimated present value of the anticipated future tax benefits that are the subject of the Tax Receivable Agreement, based on certain assumptions, which payment may be made significantly in advance of the actual realization, if any, of those future tax benefits and, therefore, MarketWise, Inc. could be required to make payments under the Tax Receivable Agreement that are greater than the specified percentage of the actual tax benefits it ultimately realizes. In these situations, MarketWise, Inc.’s obligations under the Tax Receivable Agreement could have a substantial negative impact on MarketWise, Inc.’s liquidity and could have the effect of delaying, deferring, or preventing certain mergers, asset sales, other forms of business combinations, or other changes of control. In addition, to the extent that MarketWise, Inc. is unable to make payments under the Tax Receivable Agreement for any reason, the unpaid amounts will be deferred and will accrue interest until paid. There can be no assurance that MarketWise, Inc. will be able to fund or finance its obligations under the Tax Receivable Agreement.
MarketWise, Inc. will not be reimbursed for any payments made to the MarketWise Members under the Tax Receivable Agreement in the event that any tax benefits are disallowed.
Payments under the Tax Receivable Agreement will be based on the tax reporting positions that MarketWise, Inc. determines, and the IRS or another tax authority may challenge all or part of the tax basis increases or other tax benefits MarketWise, Inc. claims, as well as other related tax positions it takes, and a court could sustain any such challenge. MarketWise, Inc.’s ability to settle or to forgo contesting such challenges may be restricted by the rights of the MarketWise Members pursuant to the Tax Receivable Agreement, and such restrictions apply for as long as the Tax Receivable Agreement remains in effect. In addition, MarketWise, Inc. will not be reimbursed for any cash payments previously made to the MarketWise Members under the Tax Receivable Agreement in the event that any tax benefits initially claimed by MarketWise, Inc. and for which payment has been made to the MarketWise Members are subsequently challenged by a taxing authority and are ultimately disallowed. Instead, any excess cash payments made by MarketWise, Inc. to the MarketWise Members will be netted against any future cash payments that MarketWise, Inc. might otherwise be required to make to the MarketWise Members under the terms of the Tax Receivable Agreement. However, MarketWise, Inc. might not determine that it has effectively made an excess cash payment to the MarketWise Members for a number of years following the initial time of such payment, and, if any of its tax reporting positions are by a taxing authority, MarketWise, Inc. will not be permitted to reduce any future cash payments under the Tax Receivable Agreement until any such is finally settled or determined. Moreover, the excess cash payments MarketWise, Inc. previously made under the Tax Receivable Agreement could be than the amount of future cash payments which MarketWise, Inc. would otherwise be permitted to net such excess. The applicable U.S. federal income tax rules for determining applicable tax benefits MarketWise, Inc. are complex and factual in nature, and there can be no assurance that the IRS or a court will not with MarketWise, Inc.’s tax reporting positions. As a result, payments could be made under the Tax Receivable Agreement in excess of the tax savings that MarketWise, Inc. actually realizes in respect of the tax attributes with respect to the MarketWise Members that are the subject of the Tax Receivable Agreement.
If MarketWise, Inc. were to become a publicly traded partnership taxable as a corporation for U.S. federal income tax purposes, MarketWise, Inc. and MarketWise, LLC might be subject to potentially significant tax inefficiencies, and MarketWise, Inc. would not be able to recover payments previously made by it under the Tax Receivable Agreement even if the corresponding tax benefits were subsequently determined to have been unavailable due to such status.
We intend to operate such that MarketWise, LLC does not become a publicly traded partnership taxable as a corporation for U.S. federal income tax purposes. A “publicly traded partnership” is a partnership the interests of which are traded on an established securities market or are readily tradable on a secondary market or the substantial equivalent thereof. Under certain circumstances, redemptions, exchanges or other transfers of the LLC Units could cause MarketWise, LLC to be treated as a publicly traded partnership. Applicable U.S. Treasury regulations provide for certain safe harbors from treatment as a publicly traded partnership, and we intend to operate such that transfers of LLC Units qualify for one or more such safe harbors. For example, we intend to limit the number of unitholders of MarketWise, LLC, and the MarketWise Operating Agreement provides for limitations on the ability of holders of LLC Units to redeem, exchange, or otherwise transfer their LLC Units and provides MarketWise, Inc., as the sole manager of MarketWise, LLC, with the right to impose restrictions (in addition to those already in place) on the ability of holders of LLC Units to redeem, exchange, or otherwise transfer their LLC Units to the extent
MarketWise, Inc. believes it is necessary to ensure that MarketWise, LLC will continue to be treated as a partnership for U.S. federal income tax purposes.
If MarketWise, LLC were to become a publicly traded partnership taxable as a corporation for U.S. federal income tax purposes, significant tax inefficiencies might result for MarketWise, Inc. and for MarketWise, LLC. In addition, MarketWise, Inc. may not be able to realize tax benefits covered under the Tax Receivable Agreement, and MarketWise, Inc. would not be able to recover any payments previously made by it under the Tax Receivable Agreement, even if the corresponding tax benefits (including any claimed increase in the tax basis of MarketWise, LLC’s assets) were subsequently determined to have been unavailable.
If MarketWise, Inc. were deemed to be an investment company under the Investment Company Act of 1940, applicable restrictions could make it impractical for us to continue our business as contemplated and could have a material adverse effect on our business.
Under Sections 3(a)(1)(A) and (C) of the U.S. Investment Company Act of 1940, as amended (the “Investment Company Act”), a company generally will be deemed to be an “investment company” for purposes of the Investment Company Act if (1) it is, or holds itself out as being, engaged primarily, or proposes to engage primarily, in the business of investing, reinvesting, or trading in securities or (2) it engages, or proposes to engage, in the business of investing, reinvesting, owning, holding, or trading in securities and it owns or proposes to acquire investment securities having a value exceeding 40% of the value of its total assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis. MarketWise, Inc. does not believe that it is an “investment company” as such term is defined in either of those sections of the Investment Company Act.
As the sole managing member of MarketWise, LLC, MarketWise, Inc. will control MarketWise, LLC. On that basis, MarketWise, Inc. believes that its interest in MarketWise, LLC is not an “investment security” as that term is used in the Investment Company Act. However, if MarketWise, Inc. were to cease participation in the management of MarketWise, LLC, its interest in MarketWise, LLC could be deemed an “investment security” for purposes of the Investment Company Act.
MarketWise, Inc. and MarketWise, LLC intend to conduct their respective operations so that MarketWise, Inc. will not be deemed an investment company. However, if MarketWise, Inc. were to be deemed an investment company, restrictions imposed by the Investment Company Act, including limitations on MarketWise’s capital structure and its ability to transact with affiliates, could make it impractical for us to continue our business as contemplated and could have a material adverse effect on our business.
Risks Related to Ownership of Our Class A common stock
If we do not maintain compliance with Nasdaq continued listing standards, we could be delisted from The Nasdaq Stock Market, which would negatively impact our business, our ability to raise capital, and the market price and liquidity of our Class A Common Stock.
There can be no assurance that the Company will be successful in maintaining the listing of our common stock on the Nasdaq Global Market. If we fail to meet the continued listing requirements of the Nasdaq, we could face significant material adverse consequences, including: (1) a limited availability of market quotations for our securities; (2) reduced liquidity with respect to our securities; (3) a determination that our shares are a “penny stock” if they are not already determined to be a “penny stock” at the time of such failure to meet such requirements, which will require brokers trading in our securities to adhere to more stringent rules, possibly resulting in a reduced level of trading activity in the secondary trading market for our securities; (4) a limited amount of news and analyst coverage for us; and (5) a decreased ability to issue additional securities or obtain additional financing in the future.
Purchases of shares of our common stock by us pursuant to a stock repurchase program may affect the value of our common stock, and there can be no assurance that our stock repurchase program will enhance stockholder value.
Our Board previously approved a stock repurchase program. Repurchase activities pursuant to a stock repurchase program could increase, or reduce the size of any decrease in, the market price of our common stock at
that time and, as a result, the price of our shares of common stock could be higher than the price that otherwise might exist in the open market at that time.
A share repurchase program is intended to enhance long-term stockholder value; however, short-term share price fluctuations could reduce the program’s effectiveness. Repurchases could affect the trading price of our common stock, increase trading price volatility, and a stock repurchase program may be suspended or terminated at any time, which may result in a decrease in the trading prices of our common stock at that time. Additionally, repurchases under a share repurchase program may diminish our cash reserves, which could impact our ability to pursue possible strategic opportunities and acquisitions and could result in lower overall returns on our cash balances. There can be no assurance that any share repurchases will enhance stockholder value.
Our “emerging growth company” status expired on December 31, 2025, which could increase the costs and demands on management in connection with complying with non-emerging growth company requirements.
We were deemed an “emerging growth company”, as defined in the Jumpstart Our Business Startups Act of 2012, as amended (the “JOBS Act”), which allowed us to benefit from certain temporary exemptions from various reporting requirements. On December 31, 2025, our emerging growth company status expired due to reaching the fifth anniversary of ADAC’s initial public offering. We expect the costs and demands placed upon our management to increase, as we must comply with additional disclosure and accounting requirements under applicable SEC and Nasdaq rules and regulations. Complying with these requirements is costly and time consuming, and has placed significant demands on our management and on our administrative and operational resources. If we are unable to comply with these requirements in a timely and effective fashion, our ability to comply with our financial reporting requirements and other rules that apply to reporting companies could be impaired and our business, prospects, financial condition and results of operations could be harmed.
We qualify as a smaller reporting company, and the reduced disclosure requirements applicable to smaller growth companies and smaller growth companies may make our securities less attractive to investors.
We qualify as a “smaller reporting company” as defined in Item 10(f)(1) of Regulation S-K under the Securities Act. Smaller reporting companies may take advantage of certain reduced disclosure obligations, including, among other things, providing only two years of audited financial statements in its periodic reports. To the extent we take advantage of such reduced disclosure obligations, it may also make comparison of our financial statements with other public companies difficult or impossible.
It is difficult to predict whether investors will find our securities less attractive as a result of our taking advantage of these exemptions and relief granted to smaller reporting companies. If some investors find our securities less attractive as a result, the trading prices of our securities may be lower than they otherwise would be, there may be a less active trading market for our securities and the market price of our securities may be more volatile.
If we lose our “smaller reporting company” status, we will no longer be able to take advantage of certain exemptions from reporting. If we lose our "non-accelerated filer" status, we will be required to comply with the auditor attestation requirements of Section 404 of SOX. We will incur additional expenses in connection with such compliance and our management will need to devote additional time and effort to implement and comply with such requirements.
The dual class structure of our common stock may adversely affect the trading price or liquidity of our Class A common stock.
We cannot predict whether our dual-class structure will result in a lower or more volatile market price of our Class A common stock or in adverse publicity or other adverse consequences. Certain index providers have announced restrictions on including companies with multiple class share structures in certain of their indices. For example, in July 2017, FTSE Russell and Standard & Poor’s announced that they would cease to allow most newly public companies utilizing dual or multi-class capital structures to be included in their indices. Under the announced policies, our dual class capital structure would make us ineligible for inclusion in any of these indices. Given the sustained flow of investment into passive strategies that seek to track certain indices, exclusion from stock indices
would likely preclude investment by many of these funds and could make our Class A common stock less attractive to other investors. As a result, the market price of our Class A common stock could be adversely affected.
The MarketWise Members have significant influence over us, including control over decisions that require the approval of MarketWise, Inc. stockholders.
The MarketWise Members control in the aggregate, based on the information available to us, at least 85% of the voting power represented by all of our outstanding classes of stock. Of the MarketWise Members, Monument & Cathedral, LLC controls in the aggregate, based on the information available to us, at least 43% of the voting power represented by all of our outstanding classes of stock of the voting power represented by all of our outstanding classes of stock. As a result, the MarketWise Members (and Monument & Cathedral, LLC in particular) may exercise significant influence over all matters requiring stockholder approval, including the election and removal of directors and the size of our Board, appointment and removal of officers, any amendment of our Charter or MarketWise, Inc.’s bylaws (our “Bylaws”), and any approval of significant corporate transactions (including a sale of substantially all of MarketWise, LLC’s assets), and will continue to have significant control over our management and policies, including policies around financing, compensation, and declaration of dividends.
Certain MarketWise Members or affiliates of MarketWise Members are members of our Board. These members of our Board can take actions that have the effect of delaying or preventing a change of control of MarketWise, LLC or discouraging others from making tender offers for our shares, which could prevent stockholders from receiving a premium for their shares. These actions may be taken even if other stockholders oppose them. The concentration of voting power with the MarketWise Members may have an adverse effect on the price of our securities. The interests of the MarketWise Members may not be consistent with your interests as a securityholder.
The MarketWise Members have the right to have their LLC Units redeemed or exchanged into shares of Class A common stock, which, if exercised, will dilute your economic interest in MarketWise, Inc.
We have an aggregate of approximately 45,054,990 shares of our Class A common stock authorized but unissued, including 13,612,641 shares of our Class A common stock issuable upon redemption or exchange of LLC Units that are held by the MarketWise Members. Under the terms of the MarketWise Operating Agreement, and subject to certain restrictions set forth therein, the MarketWise Members are entitled to have their LLC Units redeemed or exchanged for shares of our Class A common stock or, at our option, cash. Shares of our Class B common stock held by any such redeeming or exchanging MarketWise Member will be canceled for no additional consideration on a one-for-one basis with the redeemed or exchanged LLC Units whenever the MarketWise Members’ LLC Units are so redeemed or exchanged. While any redemption or exchange of LLC Units and corresponding cancellation of our Class B common stock will reduce the MarketWise Members’ economic interest in MarketWise and its voting interest in MarketWise, Inc., the related issuance of our Class A common stock will dilute your economic interest in us. During the year ended December 31, 2025, pursuant to the terms of the MarketWise Operating Agreement, MarketWise Members exchanged an aggregate of 381,857 LLC Units, together with an equal number of shares of Class B common stock for 381,857 newly-issued shares of our Class A common stock. The timing or size of any future issuances of our Class A common stock resulting from the redemption or exchange of LLC Units cannot be predicted.
We may issue shares of preferred stock in the future, which could make it difficult for another company to acquire us or could otherwise adversely affect our securityholders, which could depress the price of our securities.
Our Charter authorizes us to issue one or more series of preferred stock. Our Board will have the authority to determine the relative rights, limitations, preferences, privileges, restrictions, and other terms of the shares of preferred stock and to fix the number of shares constituting any series and the designation of such series, without any further vote or action by stockholders. Our preferred stock could be issued with voting, liquidation, dividend, and other rights superior to the rights of Class A common stock. The potential issuance of preferred stock may delay or prevent a change in control of us, discourage bids for our securities at a premium to the market price, and materially and adversely affect the market price and the voting and other rights of the holders of our securities.
The requirements of being a public company require significant resources and management attention and affect our ability to attract and retain executive management and qualified members to our Board.
As a public company, we have, and will continue to incur legal, regulatory, finance, accounting, investor relations, and other expenses that we did not previously incur as a private company, including costs associated with public company reporting requirements and costs of recruiting and retaining non-executive directors. We are now subject to the Exchange Act, including the reporting requirements thereunder, SOX, the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Nasdaq rules and other applicable securities rules and regulations. Compliance with these rules and regulations will increase our legal and financial compliance costs, make some activities more difficult, time-consuming, or costly (although these costs are currently unable to be estimated with any degree of certainty), and increase demand on our systems and resources, particularly after we are no longer an “emerging growth company” or a “smaller reporting company.” The expenses incurred by public companies generally for reporting and corporate governance purposes have been increasing. Our management will need to devote a substantial amount of time to ensure that we comply with all of these requirements, diverting the attention of management away from revenue-producing activities. Further, these rules and regulations may make it more difficult and more expensive for us to obtain certain types of insurance, including directors’ and officers’ liability insurance, which could make it more for us to attract and retain qualified members of our Board. We may be to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. In addition, legal and regulatory regimes and heightened standards relating to corporate governance and disclosure for public companies result in increased legal and financial compliance costs and make some activities more time consuming.
Pursuant to Section 404 of SOX, since we are no longer an emerging growth company, we will be required to furnish an attestation report on internal control over financial reporting issued by our independent registered public accounting firm. When our independent registered public accounting firm is required to undertake an assessment of our internal control over financial reporting, the cost of complying with Section 404 of SOX will significantly increase, and management’s attention may be further diverted from other business concerns, which could adversely affect our business and results of operations. We may need to hire more employees in the future or engage outside consultants to comply with the requirements of Section 404 of SOX, which will further increase cost and expense.
If we are unable to satisfy its obligations as a public company, we could be subject to delisting of our Class A common stock, fines, sanctions, and other regulatory actions and potentially civil litigation.
If we identify additional material weaknesses in our internal control over financial reporting we may be unable to produce timely and accurate financial statements, which could adversely affect our business and market price of our Class A common stock.
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of annual or interim financial statements will not be prevented or detected on a timely basis.
During the course of preparing for the Transactions, our management and independent registered public accounting firm determined that we had material weaknesses in internal controls. We implemented several steps to enhance our internal control over financial reporting and addressed the material weaknesses, which were successful as of December 31, 2023.
However, as a public company, our operations and financial reporting requirements continue to grow in scope and complexity. If we fail to maintain effective internal controls or if we identify additional material weaknesses in the future, we may be unable to accurately or timely report our financial results. This could result in delays in filing required reports with the SEC, increased audit and compliance costs, loss of investor confidence, or if significant, restatements of our financial statements. Such issues could adversely affect the market price of shares of our Class A common stock and our ability to remain in compliance with applicable listing requirements.
The market price and trading volume of our securities has been volatile, and could decline significantly, and you could lose all or part of your investment.
Securities markets worldwide experience significant price and volume fluctuations. This market volatility, as well as general economic, market, or political conditions, could reduce the market price of our Class A common stock in spite of our operating performance, which may limit or prevent investors from readily selling their Class A common stock and may otherwise negatively affect the liquidity of our Class A common stock. There can be no assurance that the market price of Class A common stock will not continue to fluctuate widely or decline significantly in the future, or that you will lose all or part of your investment, in response to a number of factors, including, among others, the following:
• actual or anticipated fluctuations in our annual or quarterly financial condition and operating results;
• actual or anticipated changes in our growth rate relative to our competitors;
• failure to meet or exceed financial estimates and projections of the investment community;
• speculation in the press or investment community about our business or industry;
• issuance of new or updated research or reports by securities analysts, or the failure of securities analysts to provide adequate coverage of our Class A common stock in the future;
• fluctuations in the valuation of companies perceived by investors to be comparable to us;
• Class A common stock and volume fluctuations attributable to inconsistent trading volume levels of our Class A common stock;
• additions or departures of key personnel;
• disputes or other developments related to proprietary rights;
• additional or unexpected changes or proposed changes in laws or regulations or differing interpretations thereof affecting our business or enforcement of these laws and regulations, or announcements relating to these matters;
• announcement or expectation of additional equity or debt financing efforts;
• equity sales by us, the MarketWise Members, our insiders, or our other stockholders;
• general economic and market conditions, including any impacts associated with inflation and increased interest rates; and
• other factors described in this “Risk Factors” section and elsewhere in this report.
In addition, broad market and industry factors may negatively affect the market price of our Class A common stock, regardless of our actual operating performance, and factors beyond our control may cause our stock price to decline rapidly and unexpectedly. In addition, in the past, companies that have experienced volatility in the market price of their stock have been subject to securities class action litigation. We may be the target of this type of litigation in the future. Litigation of this type could result in substantial costs and diversion of management’s attention and resources, which could harm our business, financial condition, results of operations or prospects. Any adverse determination in litigation could also subject us to significant liabilities.
If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, the price and trading volume of our securities could decline.
The trading market for our securities depends in part on the research and reports that securities or industry analysts publish about us or our business. We will not control these analysts, and the analysts who publish information about us may have relatively little experience with us or our industry, which could affect their ability to accurately forecast our results and could make it more likely that we fail to meet their estimates. If few or no securities or industry analysts cover us, the trading price for our securities would be negatively impacted. If one or more of the analysts who covers us downgrades our securities, publishes incorrect or unfavorable research about us,
ceases coverage of us, or fails to publish reports on us regularly, demand for and visibility of our securities could decrease, which could cause the price or trading volumes of our securities to decline.
We may be subject to securities class action, which may harm our business and operating results.
Companies that have experienced volatility in the market price of their stock have been subject to securities class action litigation. We may be the target of this type of litigation in the future. Securities litigation against us could result in substantial costs and damages, and divert management’s attention from other business concerns, which could seriously harm our business, results of operations, financial condition, or cash flows.
We may also be called on to defend ourselves against lawsuits relating to our business operations. Some of these claims may seek significant damages amounts. Due to the inherent uncertainties of litigation, the ultimate outcome of any such proceedings cannot be accurately predicted. A future unfavorable outcome in a legal proceeding could have an adverse impact on our business, financial condition, and results of operations. In addition, current and future litigation, regardless of its merits, could result in substantial legal fees, settlements, or judgment costs and a diversion of management’s attention and resources that are needed to successfully run our business.
Continued payment of dividends on our Class A common stock are subject to the continued discretion of our Board and, consequently, shareholders’ ability to achieve a return on their investment could become limited to appreciation in the price of our common stock.
In 2025, we paid quarterly and special dividends on shares of our Class A common stock. Our continued declaration and payment of dividends and institution of any other distributions of capital to shareholders will nonetheless be at the discretion of our Board and will depend on many factors, including our earnings, financial condition and results of operations, capital requirements, ability to obtain cash or other assets from our subsidiaries, restrictions imposed by applicable law, general business conditions and other factors that our Board may deem relevant. There can be no assurance that we will continue to pay dividends in the future. Therefore, the success of an investment in shares of our Class A common stock may in the future depend only upon any future appreciation in their value. There is no guarantee that shares of our Class A common stock will appreciate or even maintain their value.
Investments in equity securities are subject to loss in value.
The Company may allocate a portion of its cash on hand to investments meeting pre-determined guidelines, including U.S.-listed equity securities, with the objective to provide an acceptable rate of return while complying with established risk tolerances and liquidity parameters. The Company’s holdings may be concentrated in a relatively small number of issuers. A significant decline in the market value of our investments, which are exposed to market volatility, may negatively affect the Company’s financial condition and results of operations. Additionally, we are required under accounting principles to include changes in unrealized gains and losses on equity securities in the Company’s reported net income (loss), even though the Company has not actually realized any gain or loss by selling such securities. Accordingly, changes in the market prices of such securities can have a significant impact on the Company’s reported results for the period, even though those changes do not bear on the performance of the Company’s operating business.
Delaware law and our Charter and Bylaws contain certain provisions, including anti-takeover provisions, that limit the ability of stockholders to take certain actions and could delay or discourage takeover attempts that stockholders may consider favorable.
Our Charter and Bylaws and the General Corporation Law of the State of Delaware (the “DGCL”), contain provisions that could have the effect of rendering more difficult, delaying, or preventing an acquisition that stockholders may consider favorable, including transactions in which stockholders might otherwise receive a premium for their shares. These provisions could also limit the price that investors might be willing to pay in the future for shares of our common stock, and therefore depress the trading price of our Class A common stock. These provisions could also make it difficult for stockholders to take certain actions, including electing directors who are not nominated by the current members of our Board or taking other corporate actions, including effecting changes in our management. Among other things, Charter and Bylaws include the following provisions:
• a classified Board with staggered, three-year terms;
• the ability of our Board to issue shares of preferred stock, including “blank check” preferred stock, and to determine the price and other terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquirer;
• prohibition on cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates;
• the limitation of the liability of, and the indemnification of, our directors and officers;
• the ability of our Board to amend the Bylaws, which may allow our Board to take additional actions to prevent an unsolicited takeover and inhibit the ability of an acquirer to amend the Bylaws to facilitate an unsolicited takeover attempt; and
• advance notice procedures with which stockholders must comply to nominate candidates to our Board or to propose matters to be acted upon at a stockholders’ meeting, which could preclude stockholders from bringing matters before annual or special meetings of stockholders and delay changes in our Board and also may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of us.
These provisions, alone or together, could delay or prevent hostile takeovers and changes in control or changes in our Board or management.
The provisions of our Charter requiring exclusive forum in the Court of Chancery of the State of Delaware and the federal district courts of the United States for certain types of lawsuits may have the effect of discouraging lawsuits against our directors and officers.
Our Charter provides that, to the fullest extent permitted by law, and unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware (or, in the event that the Chancery Court does not have jurisdiction, the federal district court for the District of Delaware) will be the sole and exclusive forum for (i) any derivative action, suit or proceeding brought on our behalf, (ii) any action asserting a claim of breach of a fiduciary duty owed by any of our current or former directors, officers, other employees, or stockholders to us or our stockholders, (iii) any action asserting a claim arising pursuant to any provision of the DGCL or our Bylaws or Charter (as each may be amended from time to time) or as to which the DGCL confers exclusive jurisdiction on the Court of Chancery of the State of Delaware, or (iv) any action asserting a claim governed by the internal affairs doctrine. Our Charter also provides that, unless we consent in writing to the selection of an alternative forum, to the fullest extent permitted by law, the federal district courts of the United States of America shall be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act. However, there is uncertainty as to whether a court would enforce such provision, and investors cannot waive compliance with federal securities laws and the rules and regulations thereunder. Section 27 of the Exchange Act creates federal jurisdiction over all suits brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder and our Charter provides that the forum provision will not apply to seeking to enforce any liability or duty created by the Exchange Act.
These provisions may have the effect of discouraging lawsuits against our directors and officers. The enforceability of similar choice of forum provisions in other companies’ certificates of incorporation has been challenged in legal proceedings, and it is possible that, in connection with any applicable action brought against us, a court could find the choice of forum provisions contained in our Charter to be inapplicable or unenforceable in such action.
