Cohen (COHN) risk factors, FY2024 10-K

Other

1. 01We may make future loans to SPACs which may not be repaid
2. 02We may not be able to keep pace with continuing changes in technology
3. 03The soundness of other financial institutions and intermediaries affects us

Risks Related to Our Organizational Structure and Ownership of Our Common Stock

1. 04As a “controlled company,” our other stockholders may lose certain corporate governance protections
2. 57We could repurchase shares of our Common Stock at price levels considered excessive, the amount of our Common Stock we repurchase may decrease from historical levels, or we may not repurchase any additional shares of our Common Stock in the future
3. 58We are a holding company whose primary asset is units of membership interests in the Operating LLC, and we are dependent on distributions from the Operating LLC to pay taxes and other obligations
4. 59Our failure to deal appropriately with actual, potential or perceived conflicts of interest could damage our reputation and materially adversely affect our business
5. 60Mr. Cohen currently owns approximately 40.1% of the voting power of the Company as a result of his ownership of our outstanding Common Stock, Series E Preferred Stock and Series F Preferred Stock
6. 61Any future distributions to our stockholders will depend upon certain factors affecting our operating results, some of which are beyond our control. Any future distributions to our stockholders will depend upon certain factors affecting our operating results, some of which are beyond our control
7. 62Future sales of our Common Stock in the public market could lower the price of our Common Stock and impair our ability to raise funds in future securities offerings
8. 63Your percentage ownership in the Company may be diluted in the future
9. 64The issuance of the shares of Common Stock upon the redemption, if any, of the issued and outstanding LLC Units may cause substantial dilution to our existing stockholders and may cause the price of our Common Stock to decline
10. 65We may not be able to generate sufficient taxable income to fully realize our deferred tax asset, which would also have to be reduced if U.S. federal income tax rates are lowered
11. 66The Maryland General Corporation Law (the “MGCL”), and provisions in our charter and bylaws may prevent takeover attempts that could be beneficial to our stockholders
12. 67no stockholder is entitled to cumulate votes at any election of directors; and

Risks Related to Our Business and Our Industry

1. 05Difficult market conditions have adversely affected our business in many ways and may continue to adversely affect our business in a manner which could materially reduce our revenues
2. 06A prolonged economic slowdown, volatility in the markets, a recession, and increasing interest rates could impair our investments and harm our operating results
3. 07We may experience write downs of financial instruments and other losses related to the volatile and illiquid market conditions
4. 08Although the Company recorded net income of $8.2 and $10.4 million for the years ended December 31, 2024 and 2023, respectively we may incur losses in future periods. If we are unable to finance future losses, those losses may have a significant effect on our liquidity as well as our ability to operate our business
5. 09We have experienced difficulties in our Capital Markets segment over the past several years due to intense competition in our industry, which has resulted in significant strain on our administrative, operational and financial resources. These difficulties may continue in the future
6. 10Our gestation repo business serves a narrow market and is likely subject to highly volatile demand
7. 11Mortgage and U.S. Housing Market-Related Risks
8. 12Our Capital Markets segment depends significantly on a limited group of customers
9. 13Underwriting activities expose us to risks
10. 14If we do not retain our senior management and continue to attract and retain qualified personnel, we may not be able to execute our business strategy
11. 15Payment of severance could strain our cash flow
12. 16Our business will require a significant amount of cash, and if it is not available, our business and financial performance will be significantly harmed
13. 17Failure to obtain or maintain adequate capital and funding would adversely affect the growth and results of our operations and may, in turn, negatively affect the market price of our Common Stock
14. 18Our investments in the equity interests of SPACs and SPAC Sponsor Entities may expose us to increased risks and liabilities
15. 19Our investments in SPAC Sponsor Entities are highly speculative, subject to total loss, and completely illiquid prior to business combination
16. 20Our investments in post-business combination SPACs are carried at fair value but are subject to sale restrictions which could result in significant losses to our business
17. 21If we are unable to manage the risks of international operations effectively, our business could be adversely affected
18. 22reduced protection for intellectual property rights; and
19. 23If we are unable to manage any of these risks effectively, our business could be adversely affected
20. 24The securities settlement process exposes us to risks that may adversely affect our business, financial condition and results of operations
21. 25We are exposed to the risk that third parties that are indebted to us will not perform their obligations
22. 26We are exposed to various risks related to margin requirements under repurchase agreements and securities financing arrangements and are highly dependent on our clearing relationships
23. 27We have market risk exposure from unmatched principal transactions entered into by our brokerage desks, which could result in substantial losses to us and adversely affect our financial condition and results of operations
24. 28Pricing and other competitive pressures may impair the revenues and profitability of our brokerage business
25. 29Increase in capital commitments in our trading business increases the potential for significant losses
26. 30Our principal trading and investments expose us to risk of loss
27. 31We use a portion of our own capital in a variety of principal investment activities, each of which involves risks of illiquidity, loss of principal and revaluation of assets. As of December 31, 2024, we had $35.3 million in other investments, at fair value
28. 32The historical returns of our funds and managed accounts may not be indicative of the future results of our funds and managed accounts
29. 33There is increasing regulatory supervision of alternative asset management companies
30. 34Some of our asset management clients generally may redeem their investments, which could reduce our asset management fee revenues
31. 35The investment management business is intensely competitive, which could have a material adverse impact on our business
32. 36the relative attractiveness of the types of investments that have been or will be made
33. 37other industry participants will from time to time seek to recruit our investment professionals and other employees away from us
34. 38Any agreement to indemnify a SPAC against certain claims could negatively affect our financial results
35. 39We may in the future make loans to the SPACs in which we sponsor, which may not be repaid, in which event our financial results could be adversely affected
36. 40If our risk management systems for our businesses are ineffective, we may be exposed to material unanticipated losses
37. 41We are highly dependent on information and communications systems. Systems failures could significantly disrupt our business, which may, in turn, negatively affect our operating results
38. 42The development and use of artificial intelligence presents risks and challenges that could adversely impact our business, financial condition, and results of operations
39. 43Failure to protect client data or prevent breaches of our information systems could expose us to liability or reputational damage
40. 44We are largely dependent on Pershing LLC to provide clearing services and margin financing
41. 45Our substantial level of indebtedness could adversely affect our financial health and ability to compete. In addition, our failure to satisfy the financial covenants in our debt agreements could result in a default and acceleration of repayment of the indebtedness thereunder
42. 46result in higher interest expense in the event of increases in interest rates since some of our borrowings are and will continue to be, at variable rates of interest
43. 47Accounting rules for certain of our transactions are highly complex and involve significant judgment and assumptions. Changes in accounting interpretations or assumptions could adversely impact our financial statements
44. 48We may change our investment strategy, hedging strategy, asset allocation and operational policies without our stockholders’ consent, which may result in riskier investments and adversely affect the market value of our Common Stock
45. 49Maintenance of our Investment Company Act exemption imposes limits on our operations, and loss of our Investment Company Act exemption would adversely affect our operations
46. 50We operate in a highly regulated industry and may face restrictions on, and examination of, the way we conduct certain of our operations
47. 51client identification and anti-money laundering requirements
48. 52Substantial legal liability or significant regulatory action could have material adverse financial effects or cause significant reputational harm, either of which could seriously harm our business
49. 53The competitive pressures we face as a result of operating in highly competitive markets could have a material adverse effect on our business, financial condition, liquidity and results of operations
50. 54Employee misconduct or error, which can be difficult to detect and deter, could harm us by impairing our ability to attract and retain clients and by subjecting us to significant legal liability and reputational harm
51. 55We receive financial instruments instead of cash as consideration for some of our services, which may be illiquid, and the price we ultimately realize may be materially lower than their current fair value
52. 56SFA transactions may obligate the Company to make payments on a certain payments at, or subsequent to, maturity which may be made in cash, by returning the acquired interests in kind, or through a combination of both, which could affect our liquidity

Risks Related to General and Global Factors

1. 68Climate change concerns and incidents could disrupt our business, adversely affect the profitability of certain of our investments, adversely affect customer activity levels, adversely affect the creditworthiness of our counterparties, and damage our reputation
2. 69If we fail to control our costs effectively, our business could be disrupted, and our financial results could be adversely affected
3. 70We may need to offer new investment strategies and products in order to continue to generate revenue
4. 71Our failure to deal appropriately with conflicts of interest could damage our reputation and adversely affect our business
5. 72Our Insurance coverage may be inadequate to cover the risks facing the Company
6. 73We depend on third-party software licenses and the loss of any of our key licenses could adversely affect our ability to provide our brokerage services
7. 74If we fail to maintain effective internal control over financial reporting and disclosure controls and procedures in the future, we may not be able to accurately report our financial results, which could have an adverse effect on our business
8. 75The market price of our Common Stock may be volatile and may be affected by market conditions beyond our control
9. 76general economic conditions and slow or negative growth of related markets
10. 77Our Common Stock may be delisted, which may have a material adverse effect on the liquidity and value of our Common Stock