Hey, nice IPO filing. What’s the catch?

Tony Wagner Jan 14, 2016

Update: GoPro stocks hit an all-time low Thursday after holiday sales fell short of expectations. The company also announced layoffs of some seven percent of its workforce. The action-camera maker went public in June 2014, with a $3 billion offering. Its share prices peaked that October at $93.85. With Thursday’s news, we’re revisiting this piece on tech IPOs and risk — which originally ran on Nov. 9, 2015 — with an update to include GoPro.

It’s a job interview cliche: “What’s your biggest weakness?”

When you’re a big company filing for an IPO, there’s no saying, “I work too hard and care too much.”

It’s a question companies are legally obligated to answer comprehensively. 

IPO filings outline specific, real threats to a company’s business, couched in legalese and a laundry list of things that could go wrong — but probably won’t. 

“They’ll end up with overkill,” said Gil Luria, a financial technology analyst with Wedbush Securities.

For example, Match Group’s IPO of its portfolio of dating sites has boilerplate language about the risks of hacking and litigation, but also some very specific information about the way changing email habits could alter Match’s business model.

That makes S-1 filings anything but light reading. In last year’s record-breaking IPO from Alibaba, the “risk factors” section was nearly 27,000 words. Let’s dig in to a few other major tech IPOs and see what these companies pegged as their biggest risk factors.


All the factors behind GoPro’s recent stock nosedive are right there in its S-1. The company notes that “substantially all” of its revenue comes from its camera line, that growth might not keep the same pace and that demand is tough to predict.

Maybe the most prescient warning: GoPro noted that holiday sales are crucial to its growth, and “fourth quarter revenue comprised 44 percent and 37 percent of our 2012 and 2013 revenue, respectively.” A bad holiday season could cripple the business, and that’s what’s happened.

Another big talking point at the time was expanding GoPro’s licensed media business. So much exciting, distinctive footage is shot on GoPro cameras, why shouldn’t it get a piece of distribution? But so far it’s been a non-starter.


The top risk factor outlined in Alibaba’s offering was simply maintaining such a large marketplace, and by extension its huge market share. Other risk factors included founder Jack Ma’s importance to the company and issues with Chinese regulation and the economy.

“They had basically 80 percent of the [Chinese] e-commerce market and it’s very hard to sustain that kind of a market share,” Luria said.

Plus, “they’re so dependent on the health of the Chinese consumer that any slowdown in the spending by the Chinese consumer impacts them immediately and significantly.”

Sure enough, shares fell with China’s recent slowdown, but Alibaba has since started to bounce back


Twitter’s big risk factor in its 2013 IPO will be familiar to anyone who’s followed the company: user growth. It’s been a key point in just about every earnings call, and the driving force behind changes to the platform, most recently the new “Moments” feature and changing “favorite” stars to “like” hearts.


Jack Dorsey’s other company, the one focused on payments, is prepping for a big IPO. At the top of the risk factor list is keeping a “strong and trusted brand,” and number two is sustaining growth, but number three is the big one: Square just isn’t profitable yet.

It’s also worth noting that Square’s IPO came in below its last private valuation.


Looking way back to 2012, Facebook’s IPO seems kind of quaint. The company wondered how much larger it could get, and how it could make money as more users went to mobile “where [its] ability to monetize is unproven.” Today more people are on Facebook than ever — the company clocked a billion daily active users for the first time last quarter — and it is dominant in mobile advertising.

The Wall Street Journal noted that at the time of its IPO, Facebook got 12 percent of its revenue from Zynga, though this wasn’t listed as a risk. By the next year the “Farmville” maker was fighting off a complete implosion.

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