Cowen (COWN) Financial Report Summaries

Risks

• Difficult market conditions, market disruptions and volatility have adversely affected, and may in the future adversely affect, the Company's businesses, results of operations and financial condition.
• We may incur losses as a result of unforeseen or catastrophic events, including the emergence of a pandemic, terrorist attacks, extreme weather events or other natural disasters.
• The Company may be unable to successfully identify, manage and execute future acquisitions, investments and strategic alliances, which could adversely affect our results of operations.
• The Company's future results will suffer if the Company does not effectively manage its expanded operations.
• Volatility in the value of the Company's investments and securities portfolios or other assets and liabilities, including investment funds, or negative returns from the investments made by the Company have in the past and could in the future adversely affect the Company's results of operations and statement of financial condition.
• The Company faces strong competition from larger firms.
• Our businesses are heavily dependent on our personnel so any adverse effects on their well-being or morale could adversely affect our business.
• The Company depends on its key senior personnel and the loss of their services would have a material adverse effect on the Company's businesses and results of operations, financial condition and prospects.
• The Company's ability to retain its senior professionals is critical to the success of its businesses, and its failure to do so may materially affect the Company's reputation, business and results of operations.
• Employee misconduct could harm the Company by, among other things, impairing the Company's ability to attract and retain investors and subjecting the Company to significant legal liability, reputational harm and the loss of revenue from its own invested capital.
• The Company's investment banking businesses focus principally on specific sectors of the economy, and deterioration in the business environment in these sectors or a decline in the market for securities of companies within these sectors could materially affect our investment banking businesses.
• The financial results of the Company's investment banking businesses may fluctuate substantially from period to period.
• The Company's capital markets and strategic advisory engagements are singular in nature, do not generally provide for subsequent engagements and can lead to payment risk.
• Larger and more frequent capital commitments in the Company's trading and underwriting businesses increase the potential for significant losses.
• The market structure in which our market-making business operates may make it difficult for this business to maintain profitability.
• The growth of electronic trading and the introduction of new technology in the markets in which our market-making business operates may adversely affect this business and may increase competition.
• We are subject to potential losses and default risks as a result of our clearing and execution activities.
• Our clearing and execution operations are global and international market events could adversely impact our financial results.
• Decreases in equity trading activity by active fund managers and declining securities prices could harm our business and profitability.
• The Company's revenues and, in particular, its ability to earn incentive and investment income, would be adversely affected if there are reversals to previously accrued incentive fees or if its investment funds fall beneath their "high-water marks" as a result of negative performance.
• The Company's ability to increase revenues and improve profitability will depend on increasing assets under management in existing investment strategies and developing and marketing new investment products and strategies, including identifying and hiring or affiliating with new investment teams.
• Certain of the Company's investment funds may invest in relatively high-risk, illiquid assets, and the Company may fail to realize any profits from these activities for a considerable period of time or lose some or all of the principal amounts of these investments.
• The due diligence process that the Company's investment management business undertakes in connection with investments by the Company's investment funds is inherently limited and may not reveal all facts that may be relevant in connection with making an investment.
• Investors and beneficial owners in the Company's hedge funds can generally redeem investments with prior notice. The rate of redemptions could accelerate at any time. Historically, redemptions have created difficulties in managing the liquidity of certain of the Company's hedge funds, reduced assets under management and adversely affected the Company's revenues, and may do so in the future.
• Investments made by investment funds, including the investments of the Company's own capital in the Company's investment funds, are subject to other additional risks.
• If the Company's investment fund's counterparty for any of its derivative or non-derivative contracts defaults on the performance of those contracts, the Company may not be able to cover its exposure under the relevant contract.
• The Company may suffer losses in connection with the insolvency of prime brokers, custodians, administrators and other agents whose services the Company uses and who may hold assets of the Company's investment funds.
• Risk management activities may materially adversely affect the return on the Company's investment funds' investments if such activities do not effectively limit exposure to decreases in investment values or if such exposure is overestimated.
• Our third party reinsurance business could expose us to losses.
• We may be unable to purchase retrocession reinsurance and our retrocession agreements subject us to third-party credit risk.
• The Company may incur losses in the future.
• We have taken steps to protect our businesses from cybersecurity attacks while our employees have been working remotely, but remote working environments may be less secure and more susceptible to cybersecurity attacks which could adversely affect our ability to securely process transactions and maintain confidential financial, personal and other information.
• Operational risks relating to the failure of data processing systems and other information systems and technology or other infrastructure may disrupt the Company's business and result in losses or limit our operations and growth in the industry.
• Any cyber attack or other security breach of or vulnerability in our technology systems, or those of our clients or other third party vendors we rely on, could have operational impacts, subject us to significant liability and harm our reputation.
• The soundness of other financial institutions may adversely affect Cowen.
• Higher volumes and price volatility in the markets due to COVID-19 and other factors could lead to higher cash requirements relating to our clearing activities, which could adversely affect our liquidity position.
• Limitations on access to capital by the Company and its subsidiaries could impair its liquidity and its ability to conduct its businesses.
• We are a holding company and rely upon our subsidiaries for cash flow to make payments of principal and interest on our outstanding indebtedness.
• Servicing our debt and funding our necessary capital expenditures requires a significant amount of cash, and we may not have sufficient cash flow from our business to pay our substantial debt or to fund our necessary capital expenditures.
• Despite our current consolidated debt levels, we may incur substantially more debt or take other actions which would intensify the risks discussed above.
• Any substantial and sustained downturn in our operations due to the COVID-19 pandemic or other factors may cause us to be in breach of our debt covenants which would limit our ability to incur additional indebtedness.
• We will be required to use a significant amount of cash to redeem our Series A Cumulative Perpetual Convertible Preferred Stock, which could adversely affect our liquidity position and could make it more difficult for us to elect to redeem these securities.
• The Company's subsidiaries may become subject to additional regulations which could increase the costs and burdens of compliance or impose additional restrictions which could have a material adverse effect on the Company's businesses and the performance of the Company's investment funds.
• The Company is subject to third party litigation risk and regulatory risk which could result in significant liabilities and reputational harm which, in turn, could materially adversely affect its business, results of operations and financial condition.
• The potential for conflicts of interest within the Company, and a failure to appropriately identify and deal with conflicts of interest could adversely affect our businesses.
• Increased regulatory focus could result in regulation that may limit the manner in which the Company and its investment management business invest, materially impacting the Company's business.
• If the Company were deemed an investment company under the U.S. Investment Company Act, applicable restrictions could make it impractical for the Company to continue its respective businesses as contemplated and could have a material adverse effect on the Company's businesses and prospects.
• The consummation of the Merger is subject to a number of conditions, many of which are largely outside of the control of the parties to the Merger Agreement, and, if these conditions are not satisfied or waived on a timely basis, the Merger Agreement may be terminated and the Merger may not be completed.
• Failure to complete the Merger could adversely affect our stock price and business, results of operations or financial condition.
• While the Merger is pending, we are subject to business uncertainties and certain contractual restrictions that could adversely affect our business, results of operations or financial condition.
• The Company will incur substantial transaction fees and Merger-related costs in connection with the Merger that could adversely affect the business and operations of the Company if the Merger is not completed.
• The termination fee and restrictions on solicitation contained in the Merger Agreement may discourage other companies from trying to acquire the Company.
• Litigation against the Company, TD or the members of their respective boards, could prevent or delay the completion of the Merger or result in the payment of damages following completion of the Merger.
• Uncertainty about the Merger may adversely affect the relationships between us and our clients, vendors and employees, whether or not the Merger is completed.
• If the Merger is not consummated by August 1, 2023, either we or TD may terminate the Merger Agreement, subject to certain exceptions.
• We could change our existing dividend policy in the future and there can be no assurance that we will continue to declare cash dividends.
• The terms of our Series A Convertible Preferred Stock contains certain restrictions on our operations.
• The Company's failure to maintain effective internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act could have a material adverse effect on the Company's financial condition, results of operations and business and the price of our Class A common stock.
• Certain provisions of the Company's amended and restated certificate of incorporation and bylaws and Delaware law may have the effect of delaying or preventing an acquisition by a third party.
• If securities analysts stop publishing research or reports about us or our business or if they downgrade our common stock, the market price of our common stock and, consequently, the trading price of our other securities could decline.
• Future sales of our common stock in the public market could adversely impact the trading price of our securities.