Kodiak AI (KDK) risk factors, FY2024 10-K

Risks Related to Our Business and the Initial Business Combination

1. 01Our shareholders may not be afforded an opportunity to vote on our proposed initial business combination, which means we may complete our initial business combination even though a majority of our shareholders do not support such a combination
2. 02Your only opportunity to affect the decision regarding a potential business combination may be limited to the exercise of your right to require us to redeem your shares for cash, unless we seek shareholder approval of such business combination
3. 03If we seek shareholder approval of our initial business combination, our Sponsor, directors and executive officers have agreed to vote in favor of such initial business combination, regardless of how our public shareholders vote
4. 04In this case, our Sponsor has agreed to vote its Class B ordinary shares, and our Sponsor and our officers and directors have agreed to vote any public shares acquired in or after the Initial Public Offering in favor of our initial business combination
5. 05The redemption rights of our public shareholders may make our financial condition unattractive to potential business combination targets and may make it difficult for us to enter into a business combination with a target
6. 06The ability of our public shareholders to exercise redemption rights with respect to a significant portion of our shares could increase the probability that our initial business combination is unsuccessful and that you would have to wait for liquidation for your shares to be redeemed
7. 07While we are currently seeking shareholder approval to extend the term we have to consummate our initial business combination, we may decide to no longer seek such approval, in which case we would redeem our public shares, and the warrants may be worthless
8. 08If we seek shareholder approval of our initial business combination, our Sponsor, directors, executive officers, advisors and their affiliates may elect to purchase public shares or warrants from public shareholders, which may reduce the public “float” of our Class A ordinary shares or warrants
9. 09If a shareholder fails to receive notice of our offer to redeem our public shares in connection with our initial business combination, or fails to comply with the procedures for tendering its shares, such shares may not be redeemed
10. 10If third parties bring claims against us, the proceeds held in the Trust Account could be reduced and the per-share redemption amount received by shareholders may be less than $10.10 per public share
11. 11Our directors may decide not to enforce the indemnification obligations of our Sponsor, resulting in a reduction in the amount of funds in the Trust Account available for distribution to our public shareholders
12. 12We may not have sufficient funds to satisfy indemnification claims of our directors and executive officers
13. 13Changes in laws or regulations, or a failure to comply with any laws and regulations, may adversely affect our business, including our ability to negotiate and complete our initial business combination, and results of operations
14. 14If we are deemed to be an investment company under the Investment Company Act, we may be required to institute burdensome compliance requirements and our activities may be restricted, which may make it difficult for us to complete our initial business combination
15. 15The grant of registration rights to our Sponsor may make it more difficult to complete our initial business combination, and the future exercise of such rights may adversely affect the market price of our Class A ordinary shares
16. 16Because we are not limited to evaluating a target business in a particular industry sector and have not selected any specific target businesses to pursue in our initial business combination, you will not have the opportunity to assess the merits or risks of any particular target business’s operations
17. 17We may have a limited ability to assess the management of a prospective target business and, as a result, may affect our initial business combination with a target business whose management may not have the skills, qualifications or abilities to manage a public company
18. 18The loss of a business combination target’s key personnel could adversely impact the operations and profitability of our post-combination business
19. 19We may seek acquisition opportunities in industries or sectors which may or may not be outside of our directors and executive officers’ area of expertise
20. 20We are not required to obtain an opinion from an independent entity that commonly renders valuation opinions, and consequently, you may have no assurance from an independent source that the price we are paying for the business is fair to our shareholders from a financial point of view
21. 21Unlike most other similarly structured blank check companies, our Sponsor will receive additional Class A ordinary shares if we issue shares to consummate an initial business combination
22. 22We may issue our shares to investors in connection with our initial business combination at a price which is less than the prevailing market price of our shares at that time
23. 23Resources could be wasted in researching acquisitions that are not completed, which could materially and adversely affect subsequent attempts to identify and acquire or merge with another business
24. 24Recent fluctuations in inflation and interest rates in the United States and elsewhere could make it more difficult for us to consummate an initial business combination
25. 25Our search for a business combination, and any target business with which we ultimately consummate a business combination, may be materially adversely affected by difficult market and geopolitical conditions
26. 26Ares may choose not to refer certain opportunities to us due to reputational interests, financial interests, confidentiality concerns, legal, regulatory, tax and any other interests or considerations relevant to Ares, its clients and their respective portfolio companies
27. 27We may engage in a business combination with one or more target businesses that have relationships with entities that are affiliated with our Sponsor, executive officers, directors or existing holders, which may raise potential conflicts of interest
28. 28To complete a business combination, we may issue notes or other debt securities or otherwise incur substantial debt, which may adversely affect our leverage and financial condition and negatively impact the value of our shares
29. 29As of December 31, 2024, we had $550,800,038 in the Trust Account
30. 30We may attempt to simultaneously complete business combinations with multiple prospective targets, which may hinder our ability to complete our initial business combination and give rise to increased costs and risks that could negatively impact our operations and profitability
31. 31We may attempt to complete our initial business combination with a private company about which little information is available, which may result in a business combination with a company that is not as profitable or attractive as the limited information may have indicated
32. 32Our shareholders may collectively own a minority of the post-business combination company and accordingly, our directors and executive officers may not be able to maintain control of a target business after our initial business combination
33. 33We do not have a specified maximum redemption threshold. The absence of such a redemption threshold may make it possible for us to complete our initial business combination with which a substantial majority of our shareholders do not agree
34. 34Although we believe that the net proceeds of the Initial Public Offering, the sale of the Private Placement Warrants and
35. 35Because we must furnish our shareholders with target business financial statements, we may lose the ability to complete an otherwise advantageous initial business combination with some prospective target businesses
36. 36Compliance obligations under the Sarbanes-Oxley Act may make it more difficult for us to effectuate a business combination, require substantial financial and management resources, and increase the time and costs of completing an acquisition
37. 37If our initial business combination involves a company organized under the laws of a state of the United States, it is possible a 1% U.S. federal excise tax will be imposed on us in connection with redemptions of our ordinary shares after or in connection with such initial business combination
38. 38As an entity incorporated as a Cayman Islands exempted company, the 1% excise tax is not expected to apply to redemptions of our Class A ordinary shares (absent any regulations and other additional guidance that may be issued in the future with retroactive effect)
39. 39In recent years, challenging market conditions have caused an increasing number of special purpose acquisition companies to be unable to complete an initial business combination
40. 40Exchange rate fluctuations and currency policies may cause a target business’ ability to succeed in the international markets to be diminished
41. 41Changes in the market for directors and officers liability insurance could make it more difficult and more expensive for us to negotiate and complete an initial business combination

Risks Relating to Our Management Team

1. 42We are dependent upon our executive officers and their loss could adversely affect our ability to operate
2. 43Our ability to effectuate our initial business combination and to successfully operate thereafter will depend on our key personnel. The loss of, or inability to attract, key personnel could negatively impact the operations and profitability of our post-combination business
3. 44Our failure to appropriately address conflicts of interest could adversely affect our business and reputation
4. 45Our executive officers and directors will allocate their time to other businesses, which could have a negative impact on our ability to complete our initial business combination
5. 46Certain of our officers and directors have or will have direct and indirect economic interests in us and/or our Sponsor and such interests may potentially conflict with those of our public shareholders as we evaluate and decide whether to recommend a potential business combination to our public shareholders
6. 47Our executive officers, directors, security holders and their respective affiliates may have competitive pecuniary interests that conflict with our interests
7. 48Compliance with United States securities laws may require additional time and resources

Risks Relating to Ownership of Our Securities

1. 49You will not have any rights or interests in funds from the Trust Account, except under certain limited circumstances. Therefore, to liquidate your investment, you may be forced to sell your public shares or warrants, potentially at a loss
2. 50The NYSE may delist our securities from trading on its exchange, which could limit investors’ ability to make transactions in our securities and subject us to additional trading restrictions
3. 51You will not be entitled to protections normally afforded to investors of blank check companies subject to Rule 419 of the Securities Act
4. 52The value of the Class B ordinary shares following completion of our initial business combination is likely to be substantially higher than the nominal price paid for them, even if the trading price of our ordinary shares at such time is substantially less than $10.00 per share
5. 53We may redeem your unexpired warrants prior to their exercise at a time that is disadvantageous to you, thereby making your warrants worthless
6. 54Our warrants may have an adverse effect on the market price of our Class A ordinary shares and make it more difficult to effectuate our initial business combination
7. 55We may also issue Class A ordinary shares in connection with our redemption of our warrants
8. 56Because each Unit contains one-half of one redeemable warrant and only a whole warrant may be exercised, the Units may be worth less than units of other blank check companies
9. 57A provision of our warrant agreement may make it more difficult for us to consummate an initial business combination
10. 58Our Sponsor controls a substantial interest in us and thus may exert a substantial influence on actions requiring a shareholder vote, potentially in a manner that you do not support
11. 59We are an exempted company incorporated under the laws of the Cayman Islands. As a result, it may be difficult for investors to effect service of process within the United States upon our directors or executive officers, or enforce judgments obtained in the United States courts against our directors or officers
12. 60Provisions in our amended and restated memorandum and articles of association may inhibit a takeover of us, which could limit the price investors might be willing to pay in the future for our Class A ordinary shares and could entrench our directors
13. 61An investment in our securities may result in uncertain or adverse U.S. federal income tax consequences
14. 62Our shareholders may be held liable for claims by third parties against us to the extent of distributions received by them upon redemption of their shares
15. 63We may not hold an annual shareholder meeting until after the consummation of our initial business combination
16. 64You will not be permitted to exercise your warrants unless we register and qualify the underlying Class A ordinary shares or certain exemptions are available
17. 65The warrants may become exercisable and redeemable for a security other than the Class A ordinary shares, and there is no information regarding such other security at this time
18. 66We may reincorporate in another jurisdiction in connection with our initial business combination and such reincorporation may result in taxes imposed on shareholders or warrant holders
19. 67After our initial business combination, it is possible that a majority of our directors and officers will live outside the United States and all of our assets will be located outside the United States; therefore investors may not be able to enforce federal securities laws or their other legal rights
20. 68We may reincorporate in or transfer by way of continuation to another jurisdiction in connection with our initial business combination, and the laws of such jurisdiction may govern some or all of our future material agreements and we may not be able to enforce our legal rights
21. 69The securities in the Trust Account could bear a negative rate of interest, which could reduce the value of the assets held in trust such that the per-share redemption amount received by public shareholders may be less than $10.10 per share
22. 70We are an early stage company with no revenues, and you have no basis on which to evaluate our ability to achieve our business objective