Acacia Research (ACTG) risk factors, FY2024 10-K

Risks Related to Our Business and Business Strategy

1. 01Further, the success of any acquisition depends on, among other things, our ability to combine our business with the acquired business in a manner that does not materially disrupt existing relationships and allows us to achieve development and operational synergies
2. 02In addition, we may issue shares of our common stock or other equity securities in connection with future acquisitions of businesses and technologies. Any such issuances of shares of our common stock could result in material dilution to our existing stockholders
3. 03Our success is dependent on our ability to attract and retain the employees and management teams of our operating businesses, the loss of whom could materially adversely affect our financial condition, business and results of operations
4. 04As part of our relationship, Starboard has assisted, and is expected to continue assisting, us with sourcing and evaluating appropriate acquisition opportunities. If we or Starboard were to discontinue this relationship, we may not be able to continue to adequately source acquisition opportunities
5. 05The due diligence process we undertake in connection with new acquisitions of operating businesses or intellectual property assets may not reveal all material facts
6. 06Our acquisition strategy may include acquisitions of privately held companies, which provide more limited information, may be dependent on the talents and efforts of only a few key portfolio company personnel, and have greater vulnerability to economic downturns when compared to public company targets
7. 07If, in the future, we cease to control and operate our operating businesses, we may be deemed to be an investment company under the Investment Company Act of 1940, as amended
8. 08Both we and our operating businesses outsource a number of services to third-party service providers, which are subject to risk of disruptions, delays, and decrease in our control, which could adversely impact our operational results
9. 09We may be limited in our ability to use our net operating losses and certain other tax attributes
10. 10We have identified a material weakness in our internal control over financial reporting at Benchmark, which could, if not remediated, have negative consequences for the Company
11. 11Improper access to, misappropriation, destruction or disclosure of confidential, personal or proprietary data could result in significant harm to our reputation or the reputation of any of our operating businesses
12. 12We have a history of losses, and we may not be consistently profitable in the future
13. 13Public health threats, pandemics and outbreaks of communicable diseases could have a material adverse effect on our operations, the operations of our business partners, and the global economy as a whole
14. 14Our principal stockholder, Starboard, controls 63.6% of the voting power of our Common Stock, and its interests may conflict with our other stockholders in the future

Risks Related to our Intellectual Property Business and Industry

1. 15Our intellectual property business is reliant on the strength of our patent portfolios and is subject to evolving legislation, regulations, and rules associated with patent law
2. 16We expect patent-related legal expenses to continue to fluctuate
3. 17Patent litigation is inherently risky and may result in the invalidation of our patents, even if we are the plaintiff in an underlying action. It is difficult to predict the outcome of patent enforcement litigation at any level
4. 18The enforcement of our intellectual property depends in part upon our ability to retain the best legal counsel in order to achieve favorable outcomes from litigation, and they may become conflicted out of representing us
5. 19We may experience delays in successful prosecution, enforcement, and licensing of our patent portfolio

Risks Related to our Energy Operations Business and Industry

1. 20If oil and gas prices decline from current levels, or if there is an increase in the differential between the NYMEX-WTI and NYMEX-Henry Hub or other benchmark prices of oil and the wellhead price we receive for our production, our cash flows from our Energy Operations Business will decline
2. 21Historically, crude oil, natural gas and NGL prices have been extremely volatile. The volatility of the energy markets makes it extremely difficult to predict future oil price movements with any certainty
3. 22If commodity prices decline from current levels, production from some of Benchmark’s assets may become uneconomic and cause write downs of the value of its properties, which may adversely affect its ability to borrow, its financial condition and its ability to make distributions
4. 23projects become uneconomic, Benchmark's reserve estimates will be adjusted downward, which could negatively impact its borrowing base under its current revolving credit facility and its ability to fund operations
5. 24A write-down does not affect net cash flows from operating activities, liquidity or capital resources, but it does reduce the book value of net tangible assets, retained earnings and shareholders’ equity, and could lower the value of our common stock
6. 25Our Energy Operations Business’s hedging strategy may be ineffective in mitigating the impact of commodity price volatility on cash flows, which could adversely affect its financial condition
7. 26Our Energy Operations Business’s hedging activities could result in cash losses and may limit the prices it would otherwise realize for production, which could reduce cash flows from operations
8. 27Our Energy Operations Business’s hedging transactions expose it to counterparty credit risk and involve other risks
9. 28Unless Benchmark replaces the oil and natural gas reserves it produces, its revenues and production will decline, which would adversely affect its cash flows from operations
10. 29Producing oil and natural gas is a costly and high-risk activity with many uncertainties that could adversely affect our Energy Operations Business’s activities, financial condition or results of operations
11. 30Estimated proved reserves and future production rates are based on many assumptions that may prove to be inaccurate. Any material inaccuracies in these reserve estimates or underlying assumptions will materially affect the quantities and present value of the estimated reserves of our Energy Operations Business
12. 31Any acquisitions completed by our Energy Operations Business are subject to substantial risks that could adversely affect financial conditions and operational results
13. 32The decision to acquire a property will depend in part on the evaluation of data obtained from production reports and engineering studies, geophysical and geological analyses and seismic data and other information, the results of which are often inconclusive and subject to various interpretations
14. 33Currently, our producing properties are concentrated in the Anadarko Basin, making us vulnerable to risks associated with operating in a limited number of geographic areas
15. 34Our Energy Operations Business is primarily dependent upon a small number of customers for production sales and may experience a temporary decline in revenues and production if it loses any of those customers
16. 35Our Energy Operations Business might be unable to effectively compete with larger companies, which might adversely affect its business activities, financial condition and operational results
17. 36Many of our Energy Operations Business’s leases are in areas that have been partially depleted or drained by offset wells
18. 37Our Energy Operations Business’s revolving credit facility has restrictions and financial covenants that may restrict its business and financing activities
19. 38facility are secured by substantially all of its assets, and if it is unable to repay its indebtedness under its revolving credit facility, the lenders could seek to foreclose on its assets
20. 39The operations of our Energy Operations Business are subject to operational hazards and unforeseen interruptions for which it may not be adequately insured
21. 40Benchmark is not the operator of all of our oil and natural gas properties and therefore we are not in a position to control the timing of development efforts, the associated costs or the rate of production of the reserves on such properties
22. 41In addition, when we are not the majority owner or operator of a particular oil or natural gas project, if we are not willing or able to fund our capital expenditures relating to such projects when required by the majority owner or operator, our interests in these projects may be reduced or forfeited
23. 42Our Energy Operations Business depends in part on transportation, pipelines and refining facilities owned by others. Any limitation in the availability of those facilities could interfere with an ability to market production and could harm its business
24. 43Climate change legislation, regulatory initiatives and litigation could result in increased operating costs and reduced demand for the oil and natural gas that our Energy Operations Business produces
25. 44GHG agreements, legislation and measures on our financial performance is highly uncertain because we are unable to predict, for a multitude of individual jurisdictions, the outcome of political decision-making processes and the variables and trade-offs that inevitably occur in connection with such processes
26. 45Regulation in response to seismic activity could increase our operating and compliance costs
27. 46Rules regulating air emissions from oil and natural gas operations could result in increased capital expenditures and operating costs for our Energy Operations Business
28. 47Our Energy Operations Business’s operations are subject to environmental and operational safety laws and regulations that may expose it to significant costs and liabilities

Risks Related to our Industrial Operations Business

1. 48could have a material adverse effect on our Industrial Operations Business’s financial condition, business, and results of operations
2. 49Our Industrial Operations Business’s inability to develop new products and enhance existing products to meet customer product requirements on a cost competitive basis may negatively impact operational results
3. 50Our Industrial Operations is dependent on a limited number of customers to derive a large portion of its revenue, and the loss of one of these customers may adversely affect its financial condition, business and operational results
4. 51Our Industrial Operations Business has limited suppliers for key product components and services and any interruption in supply could impair its ability to make and deliver its signature products, adversely affecting its business, financial condition, and operational results
5. 52Failure of our Industrial Operations Business to manage inventory levels or production capacity may negatively impact its operational results
6. 53Decreased consumption of supplies could negatively impact operational results of certain of our Industrial Operations Business
7. 54Due to the international nature of our Industrial Operations Business, changes in a country’s or region’s political or economic conditions or other factors could negatively impact operational results

Risks Related to our Manufacturing Operations Business

1. 55Our Manufacturing Operations Business is subject to intense competition
2. 56Our Manufacturing Operations Business’s sales are dependent on purchases by large customers and any significant decline in these purchases or pressure from these customers to reduce prices could have a negative effect on future financial performance
3. 57Unfavorable shifts in industry-wide demand for our Manufacturing Operations Business’s products could result in inventory valuation risk
4. 58Damage to our Manufacturing Operations Business’s reputation or loss of consumer confidence could have an adverse effect on our Manufacturing Operations Business
5. 59Circumstances associated with divestitures and brand or product line exits could adversely affect our Manufacturing Operations Business’s results of operations and financial condition
6. 60Our Manufacturing Operations Business could be subject to product liability claims and involved in product recalls
7. 61Our Manufacturing Operations Business’s indebtedness may limit its financial and operating flexibility, and our Manufacturing Operations Business may incur additional debt, which could increase the associated risks
8. 62Our Manufacturing Operations Business may incur additional indebtedness. If new debt is added to our Manufacturing Operations Business’s existing debt levels, the related risks that our Manufacturing Operations Business now faces would increase

Risks Related to our Common Stock

1. 63Our quarterly performance may be volatile, which in turn may adversely affect the trading price of our common stock
2. 64Future sales of our common stock could reduce the market price of our common stock
3. 65Delaware law and our charter documents contain provisions that could discourage or prevent a potential takeover of our company that might otherwise result in our stockholders receiving a premium over the market price of their shares
4. 66Together, these provisions may make the removal of management more difficult and may discourage transactions that could otherwise involve payment of a premium over prevailing market prices for our common stock
5. 67We do not currently intend to pay dividends on our common stock in the foreseeable future, and consequently, your ability to achieve a return on your investment will depend on appreciation in the price of our common stock
6. 68Starboard’s sale of Company securities may adversely affect the market price of our common stock
7. 69We agreed to certain Governance Provisions with Starboard