Pandora 2012 Annual Report Download - page 45

Table of Contents
compensate us for losses that may occur. Our principal executive offices are located in the San Francisco Bay Area, a region known for seismic activity. In
addition, acts of terrorism could cause disruptions in our business or the economy as a whole. Our servers may also be vulnerable to computer viruses, break-
ins and similar disruptions from unauthorized tampering with our computer systems, which could lead to interruptions, delays, loss of critical data or the
unauthorized disclosure of confidential customer data. We currently have very limited disaster recovery capability, and our business interruption insurance
may be insufficient to compensate us for losses that may occur. As we rely heavily on our servers, computer and communications systems and the internet to
conduct our business and provide high quality service to our listeners, such disruptions could negatively impact our ability to run our business, result in loss of
existing or potential listeners and advertisers and increased maintenance costs, which would adversely affect our operating results and financial condition.
Risks Related to Owning Our Common Stock
Our stock price has been and will likely continue to be volatile, and the value of an investment in our common stock may decline.
The trading price of our common stock has been and is likely to continue to be volatile. In addition to the risk factors described in this section and
elsewhere in this Annual Report on Form 10-K, factors that may cause the price of our common stock to fluctuate include, but are not limited to:
• our actual or anticipated operating performance and the operating performance of similar companies in the internet, radio or digital media spaces;
• general economic conditions and their impact on advertising spending;
• the overall performance of the equity markets;
• the number of shares of our common stock publicly owned and available for trading;
• threatened or actual litigation;
• changes in laws or regulations relating to our service;
• any major change in our board of directors or management;
• publication of research reports about us or our industry or changes in recommendations or withdrawal of research coverage by securities analysts;
and
• sales or expected sales of shares of our common stock by us, and our officers, directors and significant stockholders.
In addition, the stock market has experienced extreme price and volume fluctuations that often have been unrelated or disproportionate to the operating
performance of those affected companies. Securities class action litigation has often been instituted against companies following periods of volatility in the
overall market and in the market price of a company's securities. Such litigation, if instituted against us, could result in very substantial costs, divert our
management's attention and resources and harm our business, operating results and financial condition.
Future sales of our common stock by stockholders could depress the market price of our common stock.
Sales of substantial amounts of our common stock in the public market, or the perception that such sales could occur, could adversely affect the market
price of our common stock. As of January 31, 2012, we had approximately 163.6 million shares of common stock outstanding. Following the expiration in
December 2011 of contractual lockup agreements entered into in connection with our initial public offering ("IPO"), all of these shares are generally freely
tradable, except for any shares held by our "affiliates" as defined in Rule 144 under the Securities Act, which may be sold in compliance with the volume
restrictions of Rule 144. In addition, we filed a Form S-8 under the Securities Act to register 49,026,295 shares of our common stock for issuance under our
equity incentive plans. These shares may be sold in the public market upon issuance and once vested, subject to any restrictions provided under the terms of
the applicable plan or award agreement. If these additional shares are sold, or if it is perceived that they will be sold, in the public market, the trading price of
our common stock could decline. We also may issue our shares of common stock or securities convertible into our common stock from time to time in
connection with a financing, acquisition, investments or otherwise. Any such issuance could result in substantial dilution to our existing stockholders and
cause the trading price of our common stock to decline.
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