LiveWire Group (LVWR) risk factors, FY2024 10-K

Risks Related to Our Business

1. 01We are an early-stage company with a history of losses and expect to incur significant expenses and continuing losses for several years. We have yet to achieve positive operating cash flow and, given our projected funding needs, our ability to generate positive cash flow is uncertain
2. 02Our research and development efforts may not yield the expected results or results on expected timelines or at expected costs
3. 03Increases in costs, disruption of supply, or shortage of materials and components necessary for our electric vehicles, could materially and negatively affect our business
4. 04Our limited operating history makes evaluating our business and future prospects difficult
5. 05We may be unable to develop and produce electric vehicles of sufficient quality, on a schedule and at scale that would appeal to a large customer base
6. 06The electric vehicle sector is growing and our products and services are and will be subject to competition from competitors
7. 07Our business and prospects depend significantly on our ability to build the LiveWire brand and consumers’ recognition, acceptance and adoption of the LiveWire brand. We may not succeed in continuing to maintain and strengthen the LiveWire brand
8. 08We have an established standard of quality and associated consumer expectations through our H-D motorcycle lineage. If we are unable to continue providing quality services and customer service, our business and reputation may be materially and adversely affected
9. 09Our relationship with H-D presents potential opportunities, synergies and risks. Our brand and reputation could be materially and negatively affected through negative publicity regarding H-D and its products and services
10. 10We may experience operational and financial risks if we fail to effectively and appropriately separate the LiveWire business from the H-D business
11. 11H-D could make decisions for the benefit of its overall business that could negatively impact our overall business
12. 12Our relationship with H-D may impact our other business relationships or potential business relationships
13. 13Leveraging contract manufacturers, including H-D, KYMCO and other potential partners, to contract manufacture electric vehicles is subject to risks
14. 14If retail partners are unwilling to participate in our go-to-market business model or are unable or ineffective in establishing or maintaining relationships with customers for electric vehicles, it may adversely impact our business
15. 15If we are unable to establish and maintain confidence in our long-term business prospects among customers and analysts and within our industry, or are subject to negative publicity, then our business, prospects, financial condition and operating results may suffer materially
16. 16We, our service providers, and our suppliers are subject to numerous regulations. Unfavorable changes to, or failure by us, our service providers or our suppliers to comply with these regulations could materially and negatively affect our business, prospects, financial condition and operating results
17. 17Electric vehicles are inherently new products. We may experience significant delays in the design, production and launch of our electric vehicles, which could materially and negatively affect our business, prospects, financial condition and operating results
18. 18Our business may suffer if our products or features contain defects or fail to perform as expected. We may choose to or be compelled to undertake product recalls or take other similar actions, which could adversely affect our brand image, business and operating results
19. 19Also, if a supplied vehicle component becomes the subject of a product recall, we may be required to find an alternative component, which could increase our costs and cause vehicle production delays. Additionally, we may become subject to costly litigation surrounding the component
20. 20The success of our business depends on the availability of power and charging infrastructure for electric vehicles. Limitations on that infrastructure may negatively impact our business
21. 21We may face challenges in expanding our business and operations internationally, and our ability to conduct business in international markets may be adversely affected by legal, regulatory, political and economic risks
22. 22The battery’s range and life will deteriorate with usage and time, which, if material, could negatively influence potential customers’ decisions to purchase our electric vehicles
23. 23Unexpected termination of leases or failure to renew the lease of our existing premises or to renew such leases at acceptable terms could materially and adversely affect our business
24. 24There remains significant attention, including by consumers, investors, employees and other stockholders, as well as by governmental and non-governmental organizations, on ESG matters generally and with regard to our industry specifically
25. 25Our industry and its technology are rapidly evolving and may be subject to unforeseen changes. Developments in alternative technologies or improvements in current and future enabling and competitive technologies may adversely affect the demand for our electric vehicles
26. 26Our future growth and success are dependent upon consumers’ adoption of, and their demand for, two- and three-wheeled electric vehicles in a sector that is generally competitive, cyclical and volatile
27. 27The unavailability, reduction or elimination of government and economic incentives or government policies that are favorable for electric vehicles and domestically-produced vehicles could have a material adverse effect on our business, prospects, financial condition and operating results
28. 28Our electric motorcycles’ quiet performance compared to internal combustion engine motorcycles may subject riders to greater risks
29. 29Vehicle retail sales depend heavily on affordable interest rates and availability of credit for vehicle financing and a substantial increase in interest rates could materially and adversely affect our business, prospects, financial condition and operating results
30. 30Our warranty reserves may be insufficient to cover future warranty claims which could adversely affect our business, prospects, financial condition and operating results
31. 31We may become subject to product liability claims, which could materially and negatively affect our financial condition and liquidity if we are not able to successfully defend or insure against such claims
32. 32We depend on revenue generated from a limited number of models and in the foreseeable future will be significantly dependent on a limited number of models
33. 33STACYC’s current product portfolio ranges from 12- to 20-inch electric balance bikes built for 3 to 12 year-old riders. For the foreseeable future, STACYC will depend on revenue generated from these limited number of models, until STACYC can expand the range of STACYC riders
34. 34We are subject to risks associated with exchange rate fluctuations, interest rate changes, commodity and credit risk
35. 35The loss of key personnel could adversely affect the operations and profitability of our business
36. 36Our business, prospects, financial condition and operating results may be adversely affected by health pandemics and epidemics, natural disasters, actual or threatened war, terrorist activities, political unrest, and other outbreaks
37. 37Weather may impact retail sales by our independent dealers
38. 38Any financial or economic crisis, or perceived threat of such a crisis, including a significant decrease in consumer confidence, may materially and adversely affect our business, prospects, financial condition and operating results
39. 39Our financial results may vary significantly from period to period due to fluctuations in our operating costs, product demand and other factors
40. 40We may seek to obtain future financing through the issuance of debt or equity, which may have an adverse effect on our stockholders or may otherwise adversely affect our business
41. 41We intend to continue to grant equity awards under our Incentive Award Plan, which has resulted and will result in additional share-based compensation expenses
42. 42If our electric vehicle owners modify our electric vehicles regardless of whether third-party aftermarket products are used, the electric vehicle may not operate properly, which may create negative publicity and could materially and negatively affect our business
43. 43Our inability to obtain and/or retain necessary licenses and permits to operate the business may negatively impact our financial results
44. 44If our goodwill becomes impaired, our operating results could be negatively impacted

Risks Related to the Separation and Our Ongoing Relationship with H-D

1. 45Our business and H-D’s business overlap and we may compete, or be perceived as competitors, in certain markets
2. 46Our inability to maintain a strong relationship with H-D or to resolve favorably any disputes that may arise between us and H-D could result in a significant reduction of our revenue
3. 47We are a smaller company relative to H-D which could result in increased costs because of a decrease in our purchasing power and difficulty maintaining existing customer relationships and obtaining new customers
4. 48Any decision by us to help electrify H-D products, or the products of any other company, may not achieve the intended results or return on investment when compared to developing our own motorcycle portfolio
5. 49H-D may fail to perform under various transaction agreements that were executed as part of the Separation or we may fail to have necessary systems and services in place when certain of the transaction agreements expire
6. 50We will be required to make payments to H-D under the Contract Manufacturing Agreement, Tax Matters Agreement, Master Services Agreement, and certain other agreements, and the amounts of such payments could be significant
7. 51As we are a “controlled company” within the meaning of the NYSE listing standards and rely on exemptions from certain corporate governance requirements, our stockholders may not have the same protections afforded to stockholders of companies that are subject to all NYSE corporate governance requirements
8. 52We may not be successful as an independent, publicly traded company, and we will not enjoy the same benefits that we did as a wholly owned subsidiary of H-D
9. 53H-D holds the direct contractual relationship with many key suppliers required for us to produce our electric vehicles. Disputes between H-D and these critical suppliers may negatively impact our electric vehicle production

Risks Related to Information Technology, Intellectual Property, Data Security and Privacy

1. 54We collect and process significant information about our customers and their vehicles and are subject to various privacy, marketing and consumer protection laws
2. 55We are subject to cybersecurity risks to our various information systems and software and any material failure, weakness, interruption, cyber event, incident or breach of security could prevent us from effectively operating our business
3. 56We may need to defend ourselves against intellectual property infringement claims, which may be time consuming and would cause us to incur substantial costs
4. 57If we are unable to maintain, protect or enforce our rights in our proprietary technology, brands or other intellectual property, our competitive advantage, business, financial condition and results of operations could be materially and negatively affected

Risks Related to Other Legal, Regulatory and Tax Matters

1. 58Our operations may impact the environment or cause exposure to hazardous substances, and our properties may have environmental contamination, which could result in material liabilities to us
2. 59Changes in US or international trade policy, including the continuation or imposition of tariffs and the resulting consequences, could adversely affect our business, prospects, financial condition, and operating results
3. 60The strategic partnership with KYMCO, as well as relationships with STACYC’s key vendors, could be negatively impacted by geopolitical events that might occur between mainland China and Taiwan
4. 61consequences, remedial measures and legal expenses, all of which could adversely affect our business, results of operations, financial condition and reputation
5. 62We are or may be subject to risks associated with strategic alliances or acquisitions
6. 63We are, and may in the future be, subject to legal proceedings in the ordinary course of our business. If the outcomes of these proceedings are adverse to us, it could have a material adverse effect on our business, prospects, financial condition and operating results
7. 64Unanticipated changes in effective tax rates or adverse outcomes resulting from examination of our income or other tax returns could adversely affect our results of operations and financial condition
8. 65Changes in tax laws or regulations that are applied adversely to us or our customers may materially adversely affect our business, prospects, financial condition and operating results

Risks Related to the Common Stock and Warrants

1. 66The price of our Common Stock may be volatile, and you may be unable to resell your Common Stock at or above the price at which you purchased such stock, or at all
2. 67These and other factors may lower the market price of our Common Stock, regardless of our actual operating performance. As a result, our Common Stock may trade at prices significantly below the price at which you purchased such Common Stock
3. 68If we fail to implement and maintain an effective system of internal control over financial reporting, we may be unable to accurately report our results of operations, meet our reporting obligations or prevent fraud
4. 69A market for our securities may not continue, which would adversely affect the liquidity and price of its securities
5. 70If securities or industry analysts do not publish or cease publishing research or reports about us, our business, or our market, or if they change their recommendations regarding our Common Stock adversely, then the price and trading volume of our Common Stock could decline
6. 71Concentration of ownership among our existing directors, executive officers and principal stockholders may prevent new investors from influencing significant corporate decisions
7. 72We may acquire other businesses or form other joint ventures or make investments in other companies or technologies that could negatively affect our operating results, dilute our stockholders’ ownership, increase our debt or cause us to incur significant expense
8. 73our common stock is low or volatile, we may not be able to acquire other companies or fund a joint venture project using our stock as consideration
9. 74We are a holding company with no business operations of our own and will depend on cash flow from our subsidiaries to meet our obligations
10. 75Because we do not anticipate paying any cash dividends on our capital stock in the foreseeable future, capital appreciation, if any, will be your sole source of gain
11. 76Our corporate documents and Delaware law contain provisions that could discourage, delay or prevent a change in control of our company, prevent attempts to replace or remove current management and reduce the market price of our Common Stock and warrants
12. 77We are an “emerging growth company” and the reduced disclosure requirements applicable to emerging growth companies may make our Common Stock and warrants less attractive to investors
13. 78You may only be able to exercise the public warrants on a “cashless basis” under certain circumstances, and if you do so, you will receive fewer shares of Common Stock from such exercise than if you were to exercise such warrants for cash
14. 79made upon such warrant holder in any such enforcement action by service upon such warrant holder’s counsel in the foreign action as agent for such warrant holder
15. 80We may redeem your unexpired warrants prior to their exercise at a time that is disadvantageous to you, thereby making your warrants worthless
16. 81The private placement warrants will not be redeemable by us so long as (i) they are held by the initial purchasers of the private placement warrants or its permitted transferees and (ii) the reference value exceeds $18.00 per share
17. 82The obligations associated with being a public company involve significant expenses and require significant resources and management attention, which may divert from our business operations
18. 83Our accounting and other management systems and resources may not be adequately prepared to meet the financial reporting and other requirements to which we are subject as a public company
19. 84Our facilities, and our suppliers’ facilities, are vulnerable to disruption due to natural or man-made disasters, which could become more frequent and severe due to phenomena such as climate change
20. 85Our insurance coverage strategy may not be adequate to protect us from all business risks