Sprouts Farmers Market 2013 Annual Report Download - page 42

Table of Contents
Furthermore, the stock markets have experienced extreme price and volume fluctuations that have affected and continue to
affect the market prices of equity securities of many companies. These fluctuations often have been unrelated or disproportionate
to the operating performance of those companies. These and other factors may cause the market price and demand for our
common stock to fluctuate substantially, which may limit or prevent investors from readily selling their shares of common stock and
may otherwise negatively affect the price or liquidity of our common stock. In addition, in the past, when the market price of a stock
has been volatile, holders of that stock have sometimes instituted securities class action litigation against the company that issued
the stock. If any of our stockholders were to bring a lawsuit against us, we could incur substantial costs defending the lawsuit or
paying for settlements or damages. Such a lawsuit could also divert the time and attention of our management from our business.
The large number of shares eligible for public sale could depress the market price of our common stock.
The market price of our common stock could decline as a result of sales of a large number of shares of our common stock in
the market, and the perception that these sales could occur may depress the market price. We had 147,616,560 shares of common
stock outstanding as of December 29, 2013. Of these shares, an aggregate of 40,825,000 shares of common stock sold in our IPO
and November 2013 offering by selling stockholders (referred to as our “November 2013 Offering”) are freely tradable, except for
any shares purchased by our “affiliates” as defined in Rule 144 under the Securities Act of 1933, as amended (referred to as the
“Securities Act”). We, our officers and directors and the selling stockholders in our November 2013 Offering entered into lock-up
agreements in connection with the November 2013 Offering that restrict transfers for a period of 90 days beginning on
November 25, 2013, subject to certain exceptions. This 90-day period has been extended through March 17, 2014 as a result of
our release of earnings results on February 27, 2014.
In addition, the stockholders agreement by and among us and holders of all of the outstanding shares of our common stock
prior to our IPO (referred to as the “Stockholders Agreement”) limits the ability of current equity holders (other than the Apollo
Funds) to sell their shares, subject to various exceptions, until October 31, 2014 (subject to a potential extension of up to 90 days).
However, the Apollo Funds will have the ability to require us to register shares of our common stock held by them for resale, and
our stockholders party to the stockholders agreement will also have the ability to participate in such registered offerings or to
otherwise sell the same percentage of their shares of our common stock as the percentage of shares sold by the Apollo Funds in
any such registered offering. We registered the shares offered by the selling stockholders in our November 2013 Offering pursuant
to the exercise by the Apollo Funds of a demand registration right under the Stockholders Agreement. Subject to the foregoing,
after the expiration of the restricted period, these shares may be sold in the public market, subject to prior registration or
qualification for an exemption from registration, including, in the case of shares held by affiliates, compliance with the volume
restrictions of Rule 144.
We have registered all shares of common stock that we may issue under our incentive plans. They can be freely sold in the
public market upon issuance, subject to volume limitations applicable to affiliates and the lock-up arrangements described above.
Sales of common stock as restrictions end may make it more difficult for us to sell equity securities in the future at a time and
at a price that we deem appropriate.
In the future, we may also issue our securities in connection with a capital raise or acquisitions. The amount of shares of our
common stock issued in connection with a capital raise or acquisition could constitute a material portion of our then-outstanding
shares of our common stock, which would result in dilution.
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