Jose Macias and Lisa Stimmell are partners and Courtney Mathes is senior counsel at Wilson Sonsini Goodrich & Rosati. This post is based on a WSGR memorandum by Mr. Macias, Ms. Stimmell, Ms. Mathes, and Kenisha Nicholson.

*The SV150 is released each year by Lonergan Partners, a leading executive search firm based in Silicon Valley, and is comprised of the 150 largest public companies in Silicon Valley, based on annual sales.*

## Key Changes in Risk Factor Disclosure Practices Under Amended Rules:

**Risk Factor Summary**. Rather than decrease the total number of pages of risk factors, most SV150 companies opted to maintain robust risk factor disclosure and, in accordance with the amended rules, add a risk factor summary to their Form 10-K filings. Last year, 73% of SV150 companies had more than 15 pages of risk factors, compared to 71% of the SV150 companies this year. Nearly all of the companies with more than 15 pages of risk factors this year added a risk factor summary to their Form 10-K filings.**Use and Number of Risk Factor Headings**. Nearly all of the SV150 companies now include risk factor headings. In addition, there is much broader usage of risk factor headings. Last year, most companies included three or fewer total headings. This year, most companies include four to seven total headings, and have expanded beyond the two most prevalent headings from last year, risks related to the business and risks relating to ownership of the company’s stock.**General Risk Factor Heading**. Many of the SV150 companies surveyed now include a “General Risk Factor” heading in their risk factors, and average more than four risk factors under this heading. Of note, following the effective date of, and consistent with, the amended rules, the SEC began issuing comment letters requesting that companies revise their risk factor section by relocating risks that could apply generically to any registrant or offering to the end of the risk factor section under the heading “General Risk Factors.”

Although there were several changes to risk factor disclosure practices under the amended rules, a decline in the overall length of risk factor disclosure was not one of them. Generally, the risk factor sections, measured by the total number of pages of risk factors and the total number of risk factors, increased year-over-year.

Several overarching themes from last year continued into this year:

- The length of the risk factor section, both in terms of total number of pages and total number of risk factors, tends to decrease as more years have elapsed following the IPO.
- The length of the risk factor section, both in terms of total number of pages and total number of risk factors, tends to decrease as annual sales increase.
- Companies in the technology industry tend to have the longest risk factor section, and companies in the manufacturing industry tend to have the shortest risk factor section.
- The disclosure of a full set of risk factors in Form 10-Q filings remained high, with 75% of companies surveyed this year disclosing a full set of risk factors, and this practice is particularly prevalent for newer public companies and companies in the technology industry.

There were also several notable year-over-year observations:

- Total Number of Pages of Risk Factors
- Of all the data sets within “Years Since IPO” surveyed for this report, companies that went public within the last five years had the largest year-over-year increase in total number of pages of risk factors.
- Although the newest public companies saw the largest year-over-year increase, the oldest public companies also saw an increase in total number of pages of risk factors.
- All of the data sets within “Annual Sales” saw double-digit percentage increases year-over-year in total number of pages of risk factors, except companies with annual sales of $15 billion or greater.
- Of all the data sets within “Annual Sales” surveyed for this report, companies with annual sales from $3 billion to $15 billion had the largest year-over-year increase in total number of pages of risk factors.
- Companies in the life sciences industry had a significant increase in the total number of pages of risk factors year-over-year.

## Number of Pages of Risk Factors:

Companies that went public in the last five years:

- Average: 31.8 up from 27.2, or 17%
- Median: 33 up from 27.5, or 20%

Companies that went public at least 20 years ago:

- Average: 16.4 up from 14.8, or 11%
- Median: 15 up from 14, or 7%

Companies with annual sales of $15 billion or greater:

- Average: 16.2 up from 16.1, or <1%
- Median: 14 down from 15, or 7%

Companies with annual sales from $3 billion to $15 billion:

- Average: 19.9 up from 16.5, or 21%
- Median: 18 up from 14, or 29%

Companies in the life sciences industry:

- Average: 25 up from 20.7, or 21%
- Median: 23.5 up from 18.5, or 27%

- Total Number of Risk Factors
- Overall in the SV150, the percentage increase year-over-year in total number of risk factors (3%) was much smaller than the percentage increase year-over-year in total number of pages of risk factors (13%), which may be indicative of lengthier individual risk factors for many of these companies.
- Of all the data sets within “Years Since IPO” surveyed for this report, companies that went public 15 to 19 years ago had the largest year-over-year increase, on average, in total number of risk factors, driven in part by a few companies with higher risk factor counts.
- Of all the data sets within “Annual Sales” surveyed for this report, companies with annual sales between $3 billion and $15 billion had the largest increase in total number of risk factors, although this percentage increase was significantly smaller than the increase in total number of pages of risk factors.
- Companies in the trade and services industry saw a marked decline in the total number of risk factors year-over-year, while companies in the life sciences industry had the largest increase in total number of risk factors across the industries surveyed.

## Total Number of Risk Factors:

Companies that went public 15 to 19 years ago:

- Average: 44 up from 40.4, or 9%
- Median: 39, remained flat

Companies with annual sales from $3 billion to $15 billion:

- Average: 39.7 up from 36.6, or 8%
- Median: 35 up from 33.5, or 4%

Companies in the trade and services industry:

- Average: 42.2 down from 46.5, or 9%
- Median: 37 down from 43, or 14%

Companies in the life sciences industry:

- Average: 48.8 up from 44.3, or 10%
- Median: 52.5 up from 42.5, or 24%

The complete publication, including footnotes, is available here.