Virtu Financial (VIRT) risk factors, FY2024 10-K

Risks Related to Our Business and Operations

1. 01Our revenues and profitability depend on trading volume, volatility, retail participation and other characteristics of the markets in which we operate and the order flow with which we interact, and therefore are subject to factors beyond our control, are prone to significant fluctuations and are difficult to predict
2. 02We are dependent upon our trading counterparties, clients and clearing houses to perform their obligations to us
3. 03We may incur losses in our market making activities and our execution services businesses due to failures of our customized trading platform, due to market risk or from a lack of perfect information
4. 04The valuation of the securities we hold at any particular time may result in large and occasionally anomalous swings in the value of our positions and in our earnings in any period
5. 05We face substantial competition and other competitive dynamics which could harm our financial performance
6. 06We could lose significant sources of revenues if we lose any of our larger clients or sources of order flow or lose access to an important exchange or other trading venue or if we fail to adapt to proposed new regulations, should they become final rules
7. 07We are subject to liquidity risk in our operations
8. 08Self‑clearing and other elements of our trade processing operations expose us to significant operational, financial and liquidity risks
9. 09We have a substantial amount of indebtedness, which could negatively impact our business and financial condition, and may limit our flexibility in operating our business
10. 10any of which could result in cross defaults under our other indebtedness. If we default on our indebtedness, our business, financial condition and results of operation could suffer a material adverse effect
11. 11Despite our substantial indebtedness, we may still be able to incur significantly more debt, which could intensify the risks associated with our substantial indebtedness
12. 12We depend on our technology, and our future results may be negatively impacted if we cannot remain technologically competitive
13. 13Artificial intelligence and machine learning are new and emerging technologies and could ultimately cause harm to our business
14. 14Our reliance on our computer systems and software could expose us to material financial and reputational harm if any of our computer systems or software were subject to any material disruption or corruption
15. 15We could be the target of a significant cyber-attack, threat or incident that impairs internal systems, results in adverse consequences to information our system process, store or transmit or causes reputation or monetary damages as a consequence
16. 16Our business may be harmed by computer and communication systems malfunctions, human error, failures and delays
17. 17Failure or poor performance of third‑party software, infrastructure or systems on which we rely could adversely affect our business
18. 18The use of open source software may expose us to additional risks
19. 19We may not be able to protect our intellectual property rights or may be prevented from using intellectual property necessary for our business
20. 20Fluctuations in currency exchange rates could negatively impact our earnings
21. 21We may incur material losses on foreign exchange transactions entered into on behalf of clients and be exposed to material liquidity risk due to counterparty defaults or errors
22. 22We may experience risks associated with future growth or expansion of our operations or acquisitions, strategic investments or dispositions of businesses, and we may never realize the anticipated benefits of such activities
23. 23Our future efforts to sell shares of our common stock or raise additional capital may be inhibited by regulations
24. 24We are dependent on the continued service of certain key executives, the loss or diminished performance of whom could have a material adverse effect on our business, and our success depends in part on our ability to identify, recruit and retain skilled management and technical personnel
25. 25We may be subject to increased risks or business disruption, incur losses or suffer reputational harm in relation to or as a result of climate change
26. 26Cryptocurrency and other digital assets are an emerging asset class that carries unique risk, including the risk of financial loss

Legal and Regulatory Risks

1. 27Regulatory and legal uncertainties could harm our business
2. 28operations and cash flows. These risks may be enhanced by recent scrutiny of electronic trading and market structure from regulators, lawmakers and the financial news media
3. 29Pending, proposed and other potential changes in laws and rules may adversely impact our business
4. 30Non‑compliance with applicable laws or regulatory requirements could subject us to sanctions and could negatively impact our reputation, prospects, revenues and earnings
5. 31We are subject to risks relating to litigation and potential securities law liability
6. 32Proposed legislation in the European Union, the U.S. and other jurisdictions that would impose taxes on certain financial transactions could have a material adverse effect on our business and financial results
7. 33We are exposed to risks associated with our international operations and expansion and failure to comply with laws and regulations applicable to our international operations may increase costs, reduce profits, limit growth or subject us to liability
8. 34Brexit continues to pose a risk of negatively impacting the global economy, financial markets and our business
9. 35In connection with our historical acquisitions, the Company is subject to potential liabilities that could materially and adversely affect our business

Risks Related to Our Organization and Structure

1. 36We are a holding company and our principal asset is our 56.9% of equity interest in Virtu Financial, and we are accordingly dependent upon distributions from Virtu Financial to pay dividends, if any, taxes and other expenses
2. 37The Founder Post‑IPO Member controls approximately 87.0% of the combined voting power of our common stock as a result of its ownership of our Class C and Class D Common Stock, each share of which is entitled to 1 vote and 10 votes, respectively, on all matters submitted to a vote of our stockholders
3. 38We may be unable to remain in compliance with the covenants contained in our Credit Agreement and our obligation to comply with these covenants may adversely affect our ability to operate our business
4. 39We are exempt from certain corporate governance requirements since we are a “controlled company” within the meaning of the Nasdaq rules, and as a result our stockholders do not have the protections afforded by these corporate governance requirements
5. 40We are required to pay the Virtu Post‑IPO Members and the Investor Post‑IPO Stockholders for certain tax benefits we may claim, and the amounts we may pay could be significant
6. 41shareholders. In addition, we could be required to make payments under the tax receivable agreements that are substantial and in excess of our, or a potential acquirer’s, actual cash savings in income tax

Risks Related to Our Class A Common Stock

1. 42Substantial future sales of shares of our Class A common stock in the public market could cause our stock price to fall
2. 43Failure to establish and maintain effective internal control over financial reporting could have a material adverse effect on our business, financial condition, results of operations and cash flows, and stock price
3. 44We intend to pay regular dividends to our stockholders, but our ability to do so may be limited by our holding company structure, contractual restrictions and regulatory requirements
4. 45Provisions in our charter documents and certain rules imposed by regulatory authorities may delay or prevent our acquisition by a third party
5. 46These provisions of our amended and restated certificate of incorporation and by-laws could discourage potential takeover attempts and reduce the price that investors might be willing to pay for shares of our Class A Common Stock in the future, which could reduce the market price of our Class A Common Stock

General Risks

1. 47Our stock price may be volatile
2. 48We incur increased costs as a result of being a public company
3. 49Our stock price and trading volume could decline as a result of inaccurate or unfavorable research, or the cessation of research cover, about our business published by securities or industry analysts
4. 50We may incur losses as a result of unforeseen or catastrophic events, including the emergence of another pandemic, terrorist attacks, geopolitical and/or global conflict, war, extreme weather events or other natural disasters