Travelzoo 2011 Annual Report Download - page 41

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Risks Related to the Market for our Shares
Our stock price has been volatile historically and may continue to be volatile.
The trading price of our common stock has been and may continue to be subject to wide fluctuations. During the twelve months
ended December 31, 2011, the closing price of our common stock on the NASDAQ Global Select Market ranged from $21.02 to
$101. Our stock price may fluctuate in response to a number of events and factors, such as quarterly variations in operating results;
announcements of technological innovations or new products by us or our competitors; changes in financial estimates and
recommendations by securities analysts; the operating and stock price performance of other companies that investors may deem
comparable to us; and news reports relating to trends in our markets or general economic conditions.
In addition, the stock market in general, and the market prices for Internet-related companies in particular, have experienced
volatility that often has been unrelated to the operating performance of such companies. These broad market and industry fluctuations
may adversely affect the price of our stock, regardless of our operating performance.
We are controlled by a principal stockholder.
Ralph Bartel, who founded Travelzoo and who is a Director of Travelzoo, is our largest stockholder, holding beneficially, as of
February 15, 2012, approximately 53.3% of our outstanding shares. Through his share ownership, he is in a position to control
Travelzoo and to elect our entire board of directors.
Risks Related to Legal Uncertainty
We may become subject to shareholder lawsuits over securities violations due to volatile stock price and this can be burdensome
to management and costly to defend.
Shareholder lawsuits for securities violations are often launched against companies whose stock price is volatile. Such lawsuits
involving the Company would require management’s attention to defend, which may distract attention from operating the Company.
In addition, the Company may incur substantial costs to defend itself and/or settle such claims, which may be considered advisable to
minimize the distraction and costs of defense. Such lawsuits could result in judgments against the Company requiring substantial
payments to claimants. Such costs may materially impact our results of operations and financial condition. During the third quarter
ended September 30, 2011, numerous class action and derivative lawsuits were filed against the Company. See further disclosure in
Note 3 to the accompanying consolidated financial statements.
We may become subject to burdensome government regulations and legal uncertainties affecting the Internet which could
adversely affect our business.
To date, governmental regulations have not materially restricted use of the Internet in our markets. However, the legal and
regulatory environment that pertains to the Internet is uncertain and may change. Uncertainty and new regulations could increase our
costs of doing business, prevent us from delivering our products and services over the Internet or slow the growth of the Internet. In
addition to new laws and regulations being adopted, existing laws may be applied to the Internet. New and existing laws may cover
issues which include:
• user privacy;
• anti-spam legislation;
• consumer protection;
• copyright, trademark and patent infringement;
• pricing controls;
• characteristics and quality of products and services;
• sales and other taxes; and
• other claims based on the nature and content of Internet materials.
We may be liable as a result of information retrieved from or transmitted over the Internet.
We may be sued for defamation, negligence, copyright or trademark infringement or other legal claims relating to information
that is published or made available in our products. These types of claims have been brought, sometimes successfully, against online
services in the past. The fact that we distribute information via e-mail may subject us to potential risks, such as liabilities or claims
resulting from unsolicited e-mail or spamming, lost or misdirected messages, security breaches, illegal or fraudulent use of e-mail or
interruptions or delays in e-mail service. In addition, we could incur significant costs in investigating and defending such claims, even
if we ultimately are not liable. If any of these events occur, our business could be materially adversely affected.