The following are certain risk factors that could affect our business, financial position and results of operations.
+Added: Although the risks are organized by headings and each risk is described separately, many of the risks are interrelated.
The risks that we have highlighted in the following section of this report are not the only ones that we face.
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This higher proportion of new and shopper customers typically generates proportionately greater losses, thus impacting our loss ratio.
−Removed: Like with other more-tenured insurance companies, over time a greater proportion of all customers will be renewal customers.
+Added: Like with other more-tenured insurance companies, over time we expect a greater proportion of all customers will be renewal customers.
Establishing adequate premium rates is necessary, together with investment income, if any, to generate sufficient revenue to offset losses, loss adjustments expenses, or LAE, and other costs.
If we do not accurately assess the risks that we underwrite, the premiums that we charge may not be adequate to cover our losses and expenses, which would adversely affect our results of operations and our profitability.
−Removed: We expect expenses to continue to increase in the near term as we continue to make investments in the development and expansion of our business.
−Removed: These expenses may occur in the areas of telematics, digital marketing, brand advertising, consumer-facing technologies, core insurance operations services and lines of insurance not presently offered by Root.
+Added: We expect accumulated net loss to continue to increase as we continue to make investments in the development and expansion of our business.
+Added: Expenses contributing to a net loss may occur in the areas of building embedded products, telematics, digital marketing, brand advertising, consumer-facing technologies, core insurance operations services and lines of insurance not presently offered by Root.
We may encounter unforeseen or unpredictable factors, including unforeseen operating expenses, complications or delays, which may result in increased costs, and it is difficult to predict the size and growth rate of our market, demand for our services and success of current or potential future competitors.
Our investments to grow our business may not result in increased or sufficient revenue or growth for several years or at all.
−Removed: Additionally, we will continue to incur significant expenses in connection with the repayment of the outstanding principal and accrued interest on our credit facilities, under which we had approximately $ 199.5 million of borrowings outstanding as of December 31, 2020, and as a public company, we will also incur significant legal, accounting and other expenses that we did not incur as a private company.
+Added: Additionally, we will continue to incur significant expenses in connection with the repayment of the outstanding principal and accrued interest on our term loan, and as a public company, we will also incur significant legal, accounting and other expenses that we did not incur as a private company.
Our limited operating history may make it difficult to evaluate our current business and our future prospects.
−Removed: While our revenue has grown in recent periods, this growth rate may not be sustainable and should not be considered indicative of future performance, and we may not realize sufficient revenue to achieve or maintain profitability.
−Removed: As we grow our business, we expect our revenue growth rates may slow in future periods due to a number of reasons.
−Removed: We may encounter unforeseen or unpredictable factors, which may result in increased operating expenses, complications or delays slowing demand for our service, increasing competition, a decrease in the growth of our overall market, and our failure to capitalize on growth opportunities or the maturation of our business.
−Removed: If we fail to manage our losses or to grow our revenue sufficiently to keep pace with our investments and other expenses, our business will be seriously harmed and we may not achieve or maintain profitability in future periods.
+Added: While our revenue has grown in recent periods, our historic growth rate may not be sustainable.
+Added: With changes to our focus areas of growth, our historic growth rates should not be considered indicative of future performance, and we may not realize sufficient revenue to achieve or maintain profitability.
+Added: Revenue growth rates may slow in future periods due to a number of reasons.
+Added: We may chose to preserve capital, change our focus areas of growth, or encounter unforeseen or unpredictable factors, which may result in increased operating expenses, complications or delays slowing demand for our service, increasing competition, a decrease in the growth of our overall market, and our failure to capitalize on growth opportunities or the maturation of our business.
+Added: If we fail to manage our losses or
+Added: to grow our revenue sufficiently to keep pace with our investments and other expenses, our business will be seriously harmed and we may not achieve or maintain profitability in future periods.
We may lose existing customers or fail to acquire new customers, and our future growth and profitability depend in part on our ability to successfully operate in an insurance industry that is highly competitive.
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Expanding into new geographic markets takes time, may place us in unfamiliar competitive environments, requires us to navigate and comply with extensive regulations and may occur more slowly than we expect or than it has occurred in the past.
−Removed: While our loss performance has improved over time as more customers renew their policies and remain policyholders for longer, a future loss of customers could lead to higher loss ratios or loss ratios that cease to decline, which would adversely impact our profitability.
+Added: While our loss performance has generally improved over time, loss performance is influenced by a number of factors, including inflation, and as more customers renew their policies and remain policyholders for longer, a future loss of customers could lead to higher loss ratios or loss ratios that cease to decline, which would adversely impact our profitability.
If we lose customers, our value will diminish.
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Many of our primary competitors have well-established national brands and market similar products.
−Removed: Our competitors include large national insurance companies, as well as up-and-coming companies and new market entrants in the insurtech industry, some of whom also utilize telematics and offer forms of usage-based insurance.
−Removed: Several of these established national insurance companies are larger than us and have significant competitive advantages over us, including better name recognition, higher financial ratings, greater resources, additional access to capital, and more types of insurance coverage to offer, such as health and life, than we currently do.
+Added: Our competitors include large national insurance companies, as well as up-and-coming companies and new market entrants in the insurtech industry, some of which also utilize telematics and offer forms of usage-based insurance.
+Added: Several of these established national insurance companies are larger than us and have significant competitive advantages over us, including better name recognition, higher financial ratings, greater resources, additional access to capital, and more types of insurance coverage to offer, such as health and life.
In particular, many of our competitors offer consumers the ability to purchase multiple types of insurance coverage and “bundle” them together into one policy and, in certain circumstances, include an umbrella liability policy for additional coverage at competitive prices.
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In addition to the need for substantial resources, insurance regulation could limit our ability to introduce new product offerings.
−Removed: New insurance products could take months to be approved by regulatory authorities or may not be approved at all.
+Added: New insurance products could take an extended amount of time to be approved by regulatory authorities or may not be approved at all.
If we fail to penetrate new vertical markets successfully, our revenue may grow at a slower rate than we anticipate, and our business, results of operations and financial condition could be materially adversely affected.
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• we fail to offer new and competitive products, or fail to obtain regulatory approvals necessary for expansion into new markets or in relation to our products (such as underwriting and rating requirements);
+Added: • we fail to develop an effective embedded insurance platform;
• we fail to effectively use search engines, social media platforms, digital app stores, content-based online advertising, and other online sources for generating traffic to our website and our mobile app;
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If we raise additional funds through future issuances of equity or convertible debt securities, our existing stockholders could suffer significant dilution, and any new equity securities we issue could have rights, preferences and privileges superior to those of holders of Class A common stock.
+Added: Further, if the trading price of our Class A common stock remains depressed or declines further, the potential magnitude of this dilution will increase.
As an insurance company, we are subject to extensive laws and regulations in every jurisdiction in which we conduct business, and any such issuances of equity or convertible debt securities to secure additional funds may be impeded by regulatory approvals or requirements imposed by such regulatory authorities if such issuances are deemed to result in a person acquiring “control” of our company under applicable insurance laws and regulations.
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This pandemic and related measures taken to contain the spread of COVID-19, such as government-mandated business closures, orders to “shelter in place,” or SIPs, and travel and transportation restrictions, have negatively affected the U.S.
−Removed: and global economies, disrupted global supply chains, and led to unprecedented levels of unemployment.
−Removed: In the second quarter
−Removed: of 2020, our business was favorably impacted by the SIPs as our customers drove less and we had a resulting material decline in loss coverages during this quarter, which have now returned to near pre-COVID-19 levels.
+Added: and global economies, disrupted global supply chains, and led to unemployment.
+Added: In 2020, our business was favorably impacted by the SIPs as our customers drove less and we had a resulting material decline in loss coverages, which returned to pre-COVID-19 levels in 2021.
Our business has also been impacted by certain state regulations related to COVID-19 relief efforts, including restrictions on the ability to cancel policies for non-payment, requirements to defer insurance premium payments for up to 60 days and restrictions on increasing policy premiums.
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The spread of COVID-19 has caused us to modify our business practices (including employee travel, employee work locations in certain cases, and cancellation of physical participation in meetings, events, and conferences), and we expect to take further actions as may be required or recommended by government authorities or as we determine are in the best interests of our employees and customers.
−Removed: Furthermore, COVID-19 has impacted and may further impact the broader economies of affected countries, including negatively impacting economic growth, the proper functioning of financial and capital markets, foreign currency exchange rates, and interest rates.
−Removed: It is possible that the pandemic will cause an economic slowdown of potentially extended duration, as well as a global recession.
−Removed: This could result in an increase in costs associated with claims under our policies, as well as an increase in the number of customers experiencing difficulty paying premiums, any of which could have a material adverse effect on our business and results of operations.
−Removed: Furthermore, due to COVID-19’s negative impact on driving, regulators in many states are either mandating or requesting that auto insurance companies refund a portion of their premium to their policyholders to reflect the insurer’s decrease in projected loss exposure due to the virus.
+Added: Furthermore, the COVID-19 pandemic and governmental responses thereto have impacted and may further impact the broader economies of affected countries, including creating or exacerbating supply chain disruptions and inflation and negatively impacting economic growth, the proper functioning of financial and capital markets, foreign currency exchange rates, and interest rates.
+Added: It is possible that the pandemic and governmental responses thereto will cause increased inflation, an economic slowdown of potentially extended duration, as well as a global recession.
+Added: The COVID-19 pandemic and governmental responses thereto have resulted, and could further result in, an increase in costs associated with claims under our policies, including the cost to repair or replace vehicles, as well as an increase in the number of customers experiencing difficulty paying premiums, any of which could have a material adverse effect on our business and results of operations.
+Added: Furthermore, due to the COVID-19 pandemic’s negative impact on driving, regulators in many states either mandated or requested that auto insurance companies refund a portion of their premium to their policyholders to reflect the insurer’s decrease in projected loss exposure due to the virus, and could do so again in the future.
In all of the states in which we operate, state insurance regulators have either encouraged, strongly suggested or mandated insurers to provide COVID-19-related consumer relief.
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These mandates and similar regulations or requests could negatively impact our ability to charge or increase premiums to adequately cover our losses and could result in continued increased premium write offs.
−Removed: Though we continue to monitor the COVID-19 pandemic closely, due to the speed with which it continues to develop, the global breadth of its spread, the range of governmental and community reactions thereto and any delays in wide distribution, or public acceptance, of a vaccine, there is considerable uncertainty around its duration and ultimate impact.
+Added: Though we continue to monitor the COVID-19 pandemic closely, due to the speed with which it continues to develop, including as a result of new variants, the global breadth of its spread, the range of governmental and community reactions thereto and any delays in wide distribution, or public acceptance, of vaccines (including boosters), there is considerable uncertainty around its duration and ultimate impact.
Even after the COVID-19 pandemic subsides, the U.S.
−Removed: economy and other major global economies may experience severe economic aftereffects, such as a recession, and we anticipate our business and operations could be materially adversely affected by an economic downturn in the U.S.
+Added: economy and other major global economies may experience severe economic aftereffects, such as increased inflation and/or a recession, and we anticipate our business and operations could be materially adversely affected by either in the United States.
The impact of the pandemic may also exacerbate the other risks described in these Risk Factors, and additional impacts may arise that we are not currently aware of, any of which could have a material effect on us.
−Removed: In addition, if there is a future resurgence of COVID-19, these negative impacts on our business may be further exacerbated.
+Added: In addition, if there is a future resurgence of COVID-19 or the emergence of another pandemic, these negative impacts on our business may be further exacerbated.
As a result, the full extent of the impact of the pandemic on our overall financial and operating results, whether in the near or long term, cannot be reasonably estimated at this time.
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Due to Proposition 103 in California, we are currently limited in our ability to use telematics data beyond miles-driven to underwrite insurance, including data on how the car is driven.
−Removed: This has significantly hindered our ability to
−Removed: offer cost-competitive insurance policies in California and could impede our ability to offer insurance policies in other states if they were to pass similar laws or regulations.
+Added: This has significantly hindered our ability to offer cost-competitive insurance policies in California and could impede our ability to offer insurance policies in other states if they were to pass similar laws or regulations.
Although there is currently limited federal and state legislation outside of California restricting our ability to collect driving behavior data, private organizations are implementing principles and guidelines to protect driver privacy.
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In addition, the National Association of Insurance Commissioners, or NAIC, announced on July 23, 2020 the formation of a new Race and Insurance Special Committee, or the Special Committee.
−Removed: The Special Committee is tasked with analyzing the level of diversity and inclusion within the insurance sector, identifying current practices in the insurance industry that disadvantage minorities and making recommendations to increase diversity and inclusion within the insurance sector and address practices that disadvantage minorities.
+Added: The Special Committee is tasked with analyzing the level of diversity, equity and inclusion within the insurance sector, identifying current practices in the insurance industry that disadvantage minorities and making recommendations to increase diversity, equity and inclusion within the insurance sector and address practices that disadvantage minorities.
The Special Committee may look into strengthening unfair discrimination laws, such as prohibiting the use of credit scores in the underwriting of auto insurance.
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Such disclosures could put our intellectual property at risk.
−Removed: Additionally, existing laws, such as the CCPA, future laws, and evolving attitudes about privacy protection may impair our ability to collect, use, and maintain data points of sufficient type or quantity to develop and train our algorithms.
−Removed: If such laws or regulations were enacted federally or in a large number of states in which we operate, it could impact the integrity and quality of our pricing and underwriting processes.
+Added: Additionally, existing laws, such as the California Consumer Privacy Act, or the CCPA, future laws, and evolving attitudes about privacy protection may impair our ability to collect, use, and maintain data points of sufficient type or quantity to develop and train our algorithms.
+Added: If such laws or regulations were enacted federally or
+Added: in a large number of states in which we operate, it could impact the integrity and quality of our pricing and underwriting processes.
+Added: We or Carvana may fail to develop an embedded insurance product and/or fail to perform under the parties’ commercial agreement.
+Added: We entered into a commercial agreement with Carvana on October 1, 2021, in which the parties agreed to develop an integrated automobile insurance solution for Carvana’s online car buying platform, and we will pay commissions to Carvana for insurance policies purchased by Carvana customers.
+Added: The commercial agreement includes exclusivity rights to offer automobile insurance on Carvana’s platform, and we will partner exclusively with Carvana for an enterprise total loss replacement vehicle solution.
+Added: If we or Carvana are unable to satisfy the obligations under the commercial agreement, or if we are unable to develop an embedded insurance product, that could have a material and adverse effect on our business, financial condition and results of operations.
We depend on search engines, social media platforms, digital app stores, content-based online advertising and other online sources to attract consumers to our website and our mobile app both rapidly and cost-effectively.
−Removed: If these third parties change their listings or increase their pricing, if our relationship with them deteriorates or terminates, or if other factors related to these third parties arise which are beyond our control, we may be unable to attract new customers rapidly and cost-effectively, which would adversely affect our business and results of operations.
+Added: If these third parties change their listings or increase their pricing, if our relationships with them deteriorate or terminate, or if other factors related to these third parties arise which are beyond our control, we may be unable to attract new customers rapidly and cost-effectively, which would adversely affect our business and results of operations.
Our success depends on our ability to attract consumers to our website and convert them into customers in a rapid and cost-effective manner through our mobile app.
−Removed: We depend in large part on search engines, social media
−Removed: platforms, digital app stores, content-based online advertising and other online sources for traffic to our website and our mobile app, which are material sources for new consumers.
+Added: We depend in large part on search engines, social media platforms, digital app stores, content-based online advertising and other online sources for traffic to our website and our mobile app, which are material sources for new consumers.
With respect to search engines, we are included in search results as a result of both paid search listings, where we purchase specific search terms that result in the inclusion of our advertisement, and free search listings, which depend on algorithms used by search engines.
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Additionally, changes in regulations could limit the ability of search engines and social media platforms, including but not limited to Google and Facebook, to collect data from users and engage in targeted advertising, making them less effective in disseminating our advertisements to our target customers.
−Removed: For example, the proposed Designing Accounting Safeguards to Help Broaden Oversight and Regulations on Data, or DASHBOARD, Act would mandate annual disclosure to the SEC of the type and “aggregate value” of user data used by harvesting companies, such as Facebook, Google and Amazon, including how revenue is generated by user data and what measures are taken to protect the data.
−Removed: If the costs of advertising on search engines and social media platforms increase, we may incur additional marketing expenses or be required to allocate a larger portion of our marketing spend to other channels and our business and operating results could be adversely affected.
+Added: For example, the proposed Designing Accounting Safeguards to Help Broaden Oversight and Regulations on Data, or DASHBOARD, Act would mandate annual disclosure to the Securities and Exchange Commission, or the SEC, of the type and “aggregate value” of user data used by harvesting companies, such as Facebook, Google and Amazon, including how revenue is generated by user data and what measures are taken to protect the data.
+Added: If the costs of advertising on search engines and social media platforms increase, we may incur additional marketing expenses or be required to allocate a larger portion of our marketing spend to other channels and our business and operating results could be
+Added: adversely affected.
Similarly, changes to regulations applicable to the insurance brokerage and distribution business may limit our ability to rely on key distribution platforms, such as the Root API, if the third-party distribution platforms are unable to continue to distribute our insurance products without an insurance producer license pursuant to applicable insurance laws and regulations.
+Added: From time to time (including in 2021), competition for limited and/or high-value advertising space from our competitors or other companies can result in increases in the costs we incur in our marketing efforts.
+Added: These increases to our customer acquisition costs depend on a number of factors outside of our control and can negatively affect our business and operating results.
The marketing of our insurance products depends on our ability to cultivate and maintain cost-effective and otherwise satisfactory relationships with digital app stores, in particular, those operated by Google and Apple.
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We currently hold Certificates of Authority in 50 s tates and the District of Columbia and operate in 32 of those states.
−Removed: We plan to have a presence in all 50 states and the District of Columbia in the near term but cannot guarantee that we will be able to provide nationwide coverage on that timeline or at all.
+Added: We plan to have a presence in all 50 states and the District of Columbia, but cannot guarantee that we will be able to provide nationwide coverage on that timeline or at all.
We have applied for licenses in 11 states that have not been approved or were withdrawn.
−Removed: Root Insurance Company has two pending certificate of authority applications, one with the Florida Office of Insurance Regulation and one with the Massachusetts Division of Insurance and has not had a license application denied by any insurance regulators.
−Removed: Generally, regulators in states in which our applications were withdrawn preferred that we seek approval at such time that we could demonstrate an underwriting profit and/or willingness to commit to a risk-based capital position greater than what had been required by the Ohio DOI.
+Added: Root Insurance Company has one pending certificate of authority application with the Massachusetts Division of Insurance and has not had a license application denied by any insurance regulators.
+Added: Generally, regulators in states in which our applications were withdrawn preferred that we seek approval at such time that we could demonstrate an underwriting profit and/or willingness to commit to a risk-based capital position greater than what had been required by the Ohio Department of Insurance, or the Ohio DOI.
In addition to growing our domestic business, we may also seek to expand outside of the United States.
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Changes to existing regulations, their interpretation or implementation, or new regulations could impede our use of this technology or require that we disclose our proprietary technology to our competitors, which could negatively impact our competitive position and result in a material adverse effect on our business, results of operations, and financial condition.
−Removed: California voters recently approved the California Privacy Rights and Enforcement Act, or the CPRA, which will become effective January 1, 2023, and which affords California residents significantly more control over their personal information, including the right to information about the logic of certain algorithmic decisions about them and the right to opt-out of such decisions, imposes heightened compliance obligations on covered businesses and establishes a new enforcement agency dedicated to consumer privacy.
+Added: For example, California voters recently approved the California Privacy Rights and Enforcement Act, or the CPRA, which will become effective January 1, 2023, and which affords California residents significantly more control over their personal information, including the right to information about the logic of certain algorithmic decisions about them and the right to opt-out of such decisions, imposes heightened compliance obligations on covered businesses and establishes a new enforcement agency dedicated to consumer privacy.
The CPRA mandates issuance of regulations which could require disclosure of our proprietary technology, limit the effectiveness of our products and reduce demand for them.
−Removed: We may not be able to manage our growth effectively.
−Removed: Our rapid growth has placed and may continue to place significant demands on our management and our operational and financial resources.
−Removed: For example, we grew our employee base from 254 as of December 31, 2018 to 1,007 as of December 31, 2020.
−Removed: We have hired and expect to continue hiring additional personnel to support our rapid growth.
−Removed: Our organizational structure is becoming more complex as we add staff, and we will need to enhance our operational, financial and management controls as well as our reporting systems and procedures as we transition from being a private company to a public company.
−Removed: We will require significant capital expenditures and the allocation of valuable management resources to grow and change in these areas without undermining our corporate culture of rapid innovation, teamwork and attention to the insurance-buying experience for the customer.
−Removed: If we cannot manage our growth effectively to maintain the quality and efficiency of our customers’ insurance-buying experience as well as the cost-effectiveness of our insurance products, as well as their experience as ongoing customers, our business could be harmed as a result, and our results of operations and financial condition could be materially and adversely affected.
We are subject to full scope financial examinations by state insurance regulatory authorities in each state in which one of our domestic insurance company subsidiaries is domiciled, which could result in adverse examination findings and necessitate remedial actions.
State insurance regulators perform examinations of insurance companies under their jurisdiction to assess compliance with applicable laws and regulations, financial condition and the conduct of regulated activities at least every five years.
−Removed: Root Insurance Company is Ohio-domiciled and currently undergoing, but has not completed, its first five-year financial examination with the Ohio DOI, which includes a review of the company’s financials, governance, and operations, including its relationships and transactions with affiliates, and a specific examination of our pricing and underwriting methodologies and our regulatory capital.
−Removed: Similarly, Root Property & Casualty is a Delaware-domiciled insurer and subject to similar financial examination by the Delaware DOI.
−Removed: If, as a result of these examinations, our regulators determine that our financial condition, capital resources or other aspects of any of our operations are not satisfactory, or that we have violated applicable laws or regulations, such regulator may subject us to fines or other penalties and/or require us to take one or more remedial actions or otherwise subject us to regulatory scrutiny, such as pursuant to an enforcement action or, in the case of regulatory capital, require us to maintain additional capital.
+Added: Root Insurance Company is Ohio-domiciled and has completed, its first five-year financial examination with the Ohio DOI, which includes a review of the company’s financials, governance, and operations, including its relationships and transactions with affiliates, and a specific examination of our pricing and underwriting methodologies and our regulatory capital.
+Added: Similarly, Root Property & Casualty is a Delaware-domiciled insurer and completed a similar financial examination by the Delaware DOI.
+Added: If, as a result of examinations, our regulators determine that our financial condition, capital resources or other aspects of any of our operations are not satisfactory, or that we have violated applicable laws or regulations, such regulator may subject us to fines or other penalties and/or require us to take one or more remedial actions or otherwise subject us to regulatory scrutiny, such as pursuant to an enforcement action or, in the case of regulatory capital, require us to maintain additional capital.
The results of the examinations are a matter of public record, and our reputation may also be harmed by such penalties.
We are subject to market conduct examinations by state insurance regulatory authorities in any state in which our domestic insurance subsidiaries issue insurance policies, which could result in adverse examination findings and necessitate remedial actions.
−Removed: Our domestic insurance subsidiaries are also subject to other targeted investigations or inquiries, including market conduct examinations, in any state in which they issue policies.
+Added: Our domestic insurance subsidiaries are also subject to other investigations or inquiries, including market conduct examinations, in any state in which they issue policies.
These examinations can result in fines and other monetary penalties, as well as other regulatory orders requiring remedial, injunctive, or other corrective action.
−Removed: For example, Root Insurance Company is currently subject to a market conduct examination by the Virginia State Corporation Commission’s Bureau of Insurance.
+Added: For example, Root Insurance Company is currently subject to a market conduct examination by the Virginia State Corporation Commission’s Bureau of Insurance and the Texas Department of Insurance.
Any regulatory or enforcement action or any regulatory order imposing remedial, injunctive, or other corrective action against us resulting from this examination could have a material adverse effect on our business, reputation, financial condition or results of operations.
Our exposure to loss activity and regulation may be greater in states where we currently have most of our customers:
−Removed: Texas, Georgia and Kentucky.
−Removed: Approximately 38.7% of our gross written premium for the year ended December 31, 2020 originated from customers in Texas, Georgia and Kentucky.
−Removed: As a result of this concentration, if a significant catastrophe event or series of catastrophe events occur, and cause material losses in Texas, Georgia or Kentucky, our business, financial condition and results of operation could be materially adversely affected.
−Removed: Further, as compared to our competitors who operate on a wider geographic scale, any adverse changes in the regulatory environment affecting property and casualty insurance in Texas, Georgia or Kentucky may expose us to more significant risks.
+Added: Texas, Georgia and Louisiana.
+Added: Approximately 36.9% of our gross written premium for the year ended December 31, 2021 originated from customers in Texas, Georgia and Louisiana.
+Added: As a result of this concentration, if a significant catastrophe event or series of catastrophe events occur, and cause material losses in Texas, Georgia or Louisiana, our business, financial condition and results of operation could be materially adversely affected.
+Added: Further, as compared to our competitors who operate on a wider geographic scale, any adverse changes in the regulatory environment affecting property and casualty insurance in Texas, Georgia or Louisiana may expose us to more significant risks.
We are subject to stringent and changing privacy and data security laws, regulations, and standards related to data privacy and security, increasing the complexity of compliance.
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The CCPA excludes information covered by Gramm-Leach-Bliley Act, the Driver’s Privacy Protection Act or the California Financial Information Privacy Act from the CCPA’s scope, but the CCPA’s definition of “personal information” is broad and may encompass other information that we maintain.
−Removed: The requirements of the CCPA will expand substantially in January 2023 as a result of California voters approving the California Consumer Privacy Rights and Enforcement Act, or the CPRA, in November 2020.
−Removed: The CPRA will give California residents the ability to limit use of precise geolocation information and other categories of information classified as “sensitive”;
+Added: The requirements of the CCPA will expand substantially in January 2023 as a result of California voters approving the CPRA, in November 2020.
+Added: The CPRA will give California residents the ability to:
+Added: limit use of precise
+Added: geolocation information and other categories of information classified as “sensitive”;
add e-mail addresses and passwords to the list of personal information that, if lost or breached, would entitle affected individuals to bring private lawsuits;
and establish the California Privacy Protection Agency to implement and enforce the new law, as well as impose administrative fines.
−Removed: The effects of the CCPA, CPRA, and other similar state or federal laws, are potentially significant and may require us to modify our data processing practices and policies, incur substantial compliance costs and subject us to increased potential liability.
−Removed: Some observers have noted that the CCPA and CPRA could mark the beginning of a trend toward more stringent privacy legislation in the United States.
−Removed: There is also discussion in Congress of new comprehensive federal data protection and privacy laws to which we likely would be subject if it is enacted.
−Removed: Until an overarching federal privacy law is passed, however, it is anticipated that individual states will continue to adopt or amend state laws and
−Removed: regulations governing data privacy and cybersecurity, which could increase the cost and complexity of our compliance efforts and could impact the integrity and quality of our pricing and underwriting processes.
+Added: The effects of the CCPA, the CPRA, and other similar state or federal laws, are potentially significant and may require us to modify our data processing practices and policies, incur substantial compliance costs and subject us to increased potential liability.
+Added: Some observers have noted that the CCPA and the CPRA could mark the beginning of a trend toward more stringent privacy legislation in the United States.
+Added: There is also discussion in Congress of new comprehensive federal data protection and privacy laws to which we likely would be subject to if enacted.
+Added: Until an overarching federal privacy law is passed, however, it is anticipated that individual states will continue to adopt or amend state laws and regulations governing data privacy and cybersecurity, which could increase the cost and complexity of our compliance efforts and could impact the integrity and quality of our pricing and underwriting processes.
Additionally, in response to the growing threat of cyberattacks in the insurance industry, certain jurisdictions have begun to impose new cybersecurity laws and regulations.
On October 24, 2017, the NAIC adopted its Insurance Data Security Model Law, intended to serve as model legislation for states to enact in order to govern cybersecurity and data protection practices of insurers, insurance agents, and other licensed entities registered under state insurance laws.
−Removed: Alabama, Connecticut, Delaware, Indiana, Louisiana, Michigan, Mississippi, New Hampshire, Ohio, South Carolina and Virginia have adopted versions of the Insurance Data Security Model Law, each with a different effective date, and other states may adopt versions of the Insurance Data Security Model Law in the future.
+Added: A number of states have adopted versions of the Insurance Data Security Model Law, each with a different effective date, and other states may adopt versions of the Insurance Data Security Model Law in the future.
Also in 2017, the New York State Department of Financial Services adopted regulations providing minimum standards for insurance companies’ cybersecurity programs, requiring an annual certification confirming compliance.
In May 2018, South Carolina passed a cybersecurity bill requiring, among other things, any insurance entity operating in the state to establish and implement a cybersecurity program protecting their business and their customers from a data breach, to investigate data breaches and to notify regulators of a cybersecurity event.
−Removed: Some jurisdictions, such as Massachusetts, Nevada and California have enacted more generalized data security laws that apply to certain data that we process.
+Added: Some jurisdictions, such as Connecticut, Massachusetts, Nevada and California have enacted more generalized data security laws that apply to certain data that we process.
Although we take steps to comply with financial industry cybersecurity regulations and other data security laws and believe we are materially compliant with their requirements, our failure to comply with new or existing cybersecurity regulations could result in material regulatory actions and other penalties.
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If we expand into Europe, we may also face privacy, data security, and data protection risks in connection with requirements of the General Data Protection Regulation (E.U.) 2016/679, or GDPR, and other data protection regulations.
−Removed: Among other stringent requirements, the GDPR restricts transfers of data outside of the E.U.
−Removed: to third countries deemed to lack adequate privacy protections (such as the U.S.), unless an appropriate safeguard specified by the GDPR is implemented.
−Removed: A July 16, 2020 decision of the Court of Justice of the European Union invalidated a key mechanism for lawful data transfer to the U.S.
−Removed: and called into question the viability of its primary alternative.
−Removed: As such, the ability of companies to lawfully transfer personal data from the E.U.
−Removed: is presently uncertain.
+Added: Among other stringent requirements, the GDPR restricts transfers of data outside of the European Union.
+Added: to third countries deemed to lack adequate privacy protections (such as the United States), unless an appropriate safeguard specified by the GDPR is implemented.
+Added: A July 16, 2020 decision of the Court of Justice of the European Union invalidated a key mechanism for lawful data transfer to the United States and had called into question the viability of its primary alternative.
+Added: While this ambiguity has largely been resolved, the ability of companies to lawfully transfer personal data from the European Union to the United States at the very least requires updated transfer mechanisms and great attention to detail.
Other countries have enacted or are considering enacting similar cross-border data transfer rules or data localization requirements.
−Removed: These developments could limit our ability to deliver our products in the E.U.
−Removed: and other foreign markets.
+Added: These developments could limit our ability to deliver our products in the European Union and other foreign markets.
In addition, any failure or perceived failure to comply with these rules may result in regulatory fines or penalties including orders that require us to change the way we process data.
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We rely on our technology and engineering staff and vendors to successfully implement changes to and maintain our systems and services in an efficient and secure manner.
−Removed: Like all information systems and technology, our website and mobile app may contain or develop material errors, failures, vulnerabilities or bugs, particularly when new features or capabilities are released, and may be subject to computer viruses or malicious code, break-ins, phishing impersonation attacks, attempts to overload our servers with denial-of-service or other attacks, ransomware and similar incidents or disruptions from unauthorized use of our computer
−Removed: systems, as well as unintentional incidents causing data leakage, any of which could lead to interruptions, delays or website or mobile app shutdowns.
+Added: Like all information systems and technology, our website and mobile app may contain or develop material errors, failures, vulnerabilities or bugs, particularly when new features or capabilities are released, and are subject to fraud, computer viruses or malicious code, break-ins, phishing impersonation attacks, attempts to overload our servers with denial-of-service or other attacks, ransomware and similar incidents or disruptions from unauthorized use of our computer systems, as well as unintentional incidents causing data leakage, any of which could lead to interruptions, delays or website or mobile app shutdowns.
From time to time, third parties may misappropriate our data through website scraping, bots or other means and aggregate this data on their websites with data from other companies.
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In addition, to the extent that such activity creates confusion among consumers or advertisers, our brand and business could be harmed.
+Added: Many of our services are provided through the Internet which increases our exposure to potential cybersecurity attacks.
+Added: We have experienced cybersecurity threats to our information technology infrastructure and have experienced non-material cybersecurity attacks, attempts to breach our systems, fraudulent activity and other similar incidents.
+Added: In December 2021 a vulnerability was discovered in Apache Software Foundation’s Log4j—internet software broadly used in a variety of consumer and enterprise services, websites, applications and operational technology products—that allowed malicious attackers to execute code remotely on any exposed computer, which enabled them to then steal data, install malware or take control of the device.
+Added: Although we have no external facing systems utilizing this software, certain of our contractors and vendors use this software.
+Added: To date, we have not identified any malicious activity as it relates to us but our investigation is ongoing and we continue to work to both identify the effect on our contractors and vendors and help them minimize the vulnerability’s impact.
+Added: Future threats could cause harm to our business and our reputation and challenge our ability to provide reliable service, as well as negatively impact our results of operations materially.
+Added: Our insurance coverage may not be adequate to cover all the costs related to cybersecurity attacks or disruptions resulting from such events.
Operating our business and products involves the collection, storage, use and transmission of sensitive, proprietary and confidential information, including personal information, pertaining to our current, prospective and past customers, employees, contractors, and business partners.
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require us to expend significant capital and resources to investigate and remedy the incident and prevent recurrence;
−Removed: and subject us to litigation, regulatory enforcement action, fines, penalties, and other liability, which could have material adverse effect on our business, financial condition and results of operations.
+Added: and subject us to litigation, regulatory enforcement action, fines, penalties, and other liability, which could have a material adverse effect on our business, financial condition and results of operations.
Even if we take steps that we believe are adequate to protect us from cyber threats, hacking against our competitors or other companies in our industry could create the perception among our customers or potential customers that our digital platform is not safe to use.
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While we may choose to engage in a broader marketing campaign to further promote our brand, this effort may not be successful or cost effective.
−Removed: If we are unable to maintain or enhance our reputation or enhance consumer awareness of our brand in a cost-effective manner, our business, results of operations and financial condition could be materially adversely affected.
+Added: If we are unable to maintain or enhance our reputation or enhance consumer awareness
+Added: of our brand in a cost-effective manner, our business, results of operations and financial condition could be materially adversely affected.
We rely on highly skilled and experienced personnel and if we are unable to attract, retain or motivate key personnel or hire qualified personnel, our business may be seriously harmed.
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Our performance largely depends on the talents and efforts of highly skilled individuals.
−Removed: Our future success depends on our continuing ability to identify, hire, develop, motivate and retain highly skilled and experienced personnel and, if we are unable to hire and train a sufficient number of qualified employees for any reason, we may not be able to maintain or implement our current initiatives or grow, or our business may contract and we may lose market share.
+Added: Our future success depends on our continuing ability to identify, hire, develop, motivate and retain highly skilled and experienced personnel and, if we are unable to hire and train a sufficient number of qualified employees for any reason, we may not be able to maintain or implement our current initiatives, or our business may contract and we may lose market share.
+Added: The involuntary workforce reduction we announced in January 2022 may have harmed our reputation and relationship with our employees and may make it more difficult for us to recruit top talent.
+Added: We have experienced the effects of the current competitive labor market and have responded by increasing wages and/or benefits in certain circumstances and provided cash and equity to retain certain employees in order to attract and retain employees, all of which may continue to negatively impact our results of operations.
Moreover, certain of our competitors or other insurance or technology businesses may seek to hire our employees.
−Removed: We cannot assure you that our equity incentives and other compensation will provide adequate incentives to attract, retain and motivate employees in the future, particularly if the market price of our Class A common stock does not increase or declines.
+Added: We cannot assure you that our equity incentives and other compensation will provide adequate incentives to attract, retain and motivate employees in the future, particularly if the market price of our Class A common stock does not increase or declines further.
+Added: In addition, our ability to attract, retain and motivate employees may be impacted by our recent workforce reduction.
If we do not succeed in attracting, retaining and motivating highly qualified personnel, our business may be seriously harmed.
−Removed: We depend on our senior management, including Alexander Timm and Dan Manges, our co-founders, and Daniel Rosenthal, our Chief Financial Officer, as well as other key personnel.
+Added: We depend on our senior management, including Alexander Timm our Chief Executive Officer and co-founder, and Daniel Rosenthal, our Chief Revenue and Operating Officer and Chief Financial Officer, as well as other key personnel.
+Added: We have experienced turnover among our senior management and employees.
We may not be able to retain the services of any of our senior management or other key personnel, as their employment is at-will and they could leave at any time.
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New legislation or legal requirements may affect how we communicate with our customers, which could have a material adverse effect on our business model, financial condition, and results of operations.
−Removed: State and federal lawmakers and insurance regulators are focusing on the use of artificial intelligence broadly, including concerns about transparency, deception, and fairness in particular.
+Added: State and federal lawmakers and insurance regulators are focusing on the use of artificial intelligence broadly, including, in particular, concerns about transparency, deception, and fairness.
For instance, on August 24, 2020 the NAIC adopted guiding principles on artificial intelligence developed by the NAIC’s AI Working Group to provide guidance to regulators on the use of artificial intelligence in the insurance industry.
+Added: In addition, legislation regulating the use of artificial intelligence has been enacted in several states and has been proposed on the federal level.
Changes in laws or regulations, or changes in the interpretation of laws or regulations by a regulatory authority, specific to the use of artificial intelligence, may decrease our revenues and earnings and may require us to change the manner in which we conduct some aspects of our business.
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federal, state, and local consumer protection laws, including laws which place restrictions on the use of automated tools and technologies to communicate with wireless telephone subscribers or consumers generally.
−Removed: For example, a California law, effective as of July 2019, makes it unlawful for any person to use a bot to communicate with a person in California online with the intent to mislead the other person about the bot’s artificial identity for the purpose of knowingly deceiving the person about the content of the communication in order to incentivize a purchase of goods or services in a commercial transaction.
+Added: For example, California’s Bolstering Online Transparency Act, effective as of July 2019, makes it unlawful for any person to use a bot to communicate with a person in California online with the intent to mislead the other person about the bot’s artificial identity for the purpose of knowingly deceiving the person about the content of the communication in order to incentivize a purchase of goods or services in a commercial transaction.
Although we have taken steps to mitigate our liability for violations of this and other laws restricting the use of electronic communication tools, no assurances can be given that we will not be exposed to civil litigation or regulatory enforcement.
−Removed: Further, to the extent that any changes in law or regulation further restrict the ways in which we communicate with prospective or current customers before or during onboarding, customer care, or claims management, these restrictions could result in a material reduction in our customer acquisition and retention, reducing the growth prospects of our business, and adversely affecting our financial condition and future cash flows.
+Added: Further, to the extent that any changes in law or regulation further restrict the ways in which
+Added: we communicate with prospective or current customers before or during onboarding, customer care, or claims management, these restrictions could result in a material reduction in our customer acquisition and retention, reducing the growth prospects of our business, and adversely affecting our financial condition and future cash flows.
Denial of claims or our failure to accurately and timely pay claims could materially and adversely affect our business, financial condition, results of operations, and prospects.
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Changes in bodily injury claim severity are impacted by inflation in medical costs, litigation trends and precedents, regulation and the overall safety of automobile travel.
−Removed: Changes in auto property damage claim severity are driven primarily by inflation in the cost to repair vehicles, including parts and labor rates, the mix of vehicles that are declared total losses, model year mix as well as used car values.
−Removed: While actuarial models for pricing and
−Removed: reserving typically include an expected level of inflation, unanticipated increases in claim severity can arise from events that are inherently difficult to predict such as inflationary shocks or surges in health care costs.
+Added: Changes in auto property damage claim severity are driven primarily by inflation in the cost to repair or replace vehicles, including parts and labor rates, the mix of vehicles that are declared total losses, model year mix as well as used car values.
+Added: While actuarial models for pricing and reserving typically include an expected level of inflation, unanticipated increases in claim severity can arise from events that are inherently difficult to predict such as inflationary shocks or surges in health care costs.
Although we pursue various loss management initiatives to mitigate future increases in claim severity, there can be no assurances that these initiatives will successfully identify or reduce the effect of future increases in claim severity.
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Insurers with a ratio falling below certain calculated thresholds may be subject to varying degrees of regulatory action, including heightened supervision, examination, rehabilitation or liquidation.
−Removed: An insurance company with total adjusted capital that is less than 200% of its authorized control level risk-based capital is at a company action level, which would require the insurance company to file a risk-based capital plan that, among other things, contains proposals of corrective actions the company intends to take that are reasonably expected to result in the elimination of the company action level event.
+Added: An insurance company with total adjusted capital that is less than 200% of its authorized control level risk-based capital is at a company action
+Added: level, which would require the insurance company to file a risk-based capital plan that, among other things, contains proposals of corrective actions the company intends to take that are reasonably expected to result in the elimination of the company action level event.
Additional action level events occur when the insurer’s total adjusted capital falls below 150%, 100% and 70% of its authorized control level risk-based capital.
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We have disclosed to the Ohio DOI that certain of our ratios fall outside the usual range for one or more IRIS ratio factors.
−Removed: The Ohio DOI has acknowledged this and taken no regulatory action.
+Added: The Ohio DOI has acknowledged this and taken no regulatory action, although there can be no assurance that the Ohio DOI will not do so in the future.
Further, the NAIC has promulgated a Model Regulation to Define Standards and Commissioner's Authority for Companies Deemed to be in Hazardous Financial Condition, or the Hazardous Financial Condition Standards, which has been adopted by states in whole or part.
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The Ohio DOI has determined that our financial condition does meet certain of those standards and requires us to provide the Ohio DOI with monthly financial reports.
−Removed: Similarly, our wholly-owned, Cayman Islands-based captive reinsurer, Root Re, is subject to additional capital and other regulatory requirements imposed by the Cayman Islands Monetary Authority, or CIMA.
+Added: The South Carolina Department of Insurance also requires the provision of monthly financial reports.
+Added: Similarly, our wholly-owned, Cayman Islands-based captive reinsurer, Root Re, is subject to additional capital and other regulatory requirements imposed by the CIMA.
Although these capital requirements are generally less constraining than U.S.
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As a new entrant to the insurance industry, we may face additional capital and surplus requirements as compared to those of our larger and more established competitors.
−Removed: Failure to maintain adequate risk-based capital at
−Removed: the required levels could result in increasingly onerous reporting and examination requirements and could adversely affect our ability to maintain regulatory authority to conduct our business.
+Added: Failure to maintain adequate risk-based capital at the required levels could result in increasingly onerous reporting and examination requirements and could adversely affect our ability to maintain regulatory authority to conduct our business.
We may be unable to prevent, monitor or detect fraudulent activity, including policy acquisitions or payments of claims that are fraudulent in nature.
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We are subject to general business regulations and laws as well as federal and state regulations and laws specifically governing the internet and the use of mobile applications in particular.
−Removed: Existing and future laws and regulations may impede the growth of the internet or other online services and increase the cost of providing online services.
+Added: Existing and future laws and regulations may impede the growth of the internet
+Added: or other online services and increase the cost of providing online services.
These regulations and laws may involve taxes, tariffs, privacy and data security, anti-spam, content protection, electronic contracts and communications, electronic signatures and consents, consumer protection and social media marketing.
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Our intellectual property rights are valuable, and any inability to protect them could reduce the value of our products, services and brand.
−Removed: Our trade secrets, trademarks, copyrights and other intellectual property rights are important assets for us.
+Added: Our trade secrets, trademarks, copyrights, patents, know-how, and other intellectual property rights are important assets for us, in the United States and other jurisdictions.
We rely on, and expect to continue to rely on, various agreements with our employees, independent contractors, consultants and third parties with whom we have relationships, as well as trademark, trade dress, domain name, copyright, and trade secret laws, to protect our brand and other intellectual property rights.
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For example, we may fail to obtain effective intellectual property protection, or effective intellectual property protection may not be available in every country in which our products and services are available.
−Removed: Also, the efforts we have taken to protect our intellectual property rights may not be sufficient or effective, and any of our intellectual property rights may be challenged, which could result in
−Removed: them being narrowed in scope or declared invalid or unenforceable.
+Added: Also, the efforts we have taken to protect our intellectual property rights may not be sufficient or effective, especially in foreign jurisdictions, and any of our intellectual property rights may be challenged, which could result in them being narrowed in scope or declared invalid or unenforceable.
Despite our efforts to protect our proprietary rights, there can be no assurance our intellectual property rights will be sufficient to protect against others offering products or services that are substantially similar to ours and compete with our business or that unauthorized parties may attempt to copy aspects of our technology and use information that we consider proprietary.
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Current or future legal requirements may require us to disclose certain proprietary information or technology, such as our proprietary algorithms, to regulators or other third parties, including our competitors, which could impair or result in the loss of trade secret protection for such information or technology.
−Removed: The loss of trade secret protection could make it easier for third parties to compete with our products and services by copying functionality.
+Added: The loss of trade secret protection could make it easier for third parties to compete with our products
+Added: and services by copying functionality.
In addition, any changes in, or unexpected interpretations of, intellectual property laws may compromise our ability to enforce our trade secret and intellectual property rights.
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Any failure to adequately obtain such patent protection, or other intellectual property protection, could later prove to adversely impact our business.
−Removed: We currently hold various domain names relating to our brand, including joinroot.com and rootinsurance.com.
+Added: In addition, other parties may independently develop similar or competing technologies designed around any patents or patent applications that we hold.
+Added: Some of our products and technologies are not covered by any patent or patent application.
+Added: A failure to timely seek patent protection on products or technologies generally precludes us from seeking future patent protection on these products or technologies.
+Added: We currently hold various domain names relating to our brand, including joinroot.com, rootinsurance.com and root-enterprise.com.
Failure to protect our domain names could adversely affect our reputation and brand and make it more difficult for users to find our website and our mobile app.
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Our inability to protect our proprietary technology against unauthorized copying or use, as well as any costly litigation or diversion of our management’s attention and resources, could impair the functionality of our platform, delay introductions of enhancements to our platform, result in our substituting inferior or more costly technologies into our platform or harm our reputation or brand.
−Removed: In addition, we may be required to license additional technology
−Removed: from third parties to develop and market new offerings or platform features, which may not be on commercially reasonable terms or at all and could adversely affect our ability to compete.
+Added: In addition, we may be required to license additional technology from third parties to develop and market new offerings or platform features, which may not be on commercially reasonable terms or at all and could adversely affect our ability to compete.
Although we take measures to protect our intellectual property, if we are unable to prevent the unauthorized use or exploitation of our intellectual property, the value of our brand, content, and other intangible assets may be diminished, competitors may be able to more effectively mimic our service and methods of operations, the perception of our business and service to customers and potential customers may become confused, and our ability to attract customers may be adversely affected.
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Some license provisions that protect against unauthorized use, copying, transfer and disclosure of our technology may be unenforceable under the laws of certain jurisdictions and foreign countries.
−Removed: While we enter into confidentiality and invention assignment agreements with our employees and consultants and enter into confidentiality agreements with our third-party providers and strategic partners, we cannot assure you that these agreements will be effective in controlling access to, and use and distribution of, our products and proprietary information.
+Added: While we enter into confidentiality and invention assignment agreements with our employees and consultants and enter into confidentiality agreements with our third-party providers and strategic partners, we cannot assure you that these
+Added: agreements will be effective in controlling access to, and use and distribution of, our products and proprietary information.
Further, these agreements do not prevent our competitors from independently developing technologies that are substantially equivalent or superior to our offerings.
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As we gain an increasingly high public profile, the possibility of intellectual property rights claims against us grows.
−Removed: From time to time, third parties may assert claims of infringement of intellectual property rights against
+Added: From time to time, third parties may assert claims of infringement of intellectual property rights against us.
Although we believe that we will likely have meritorious defenses, there can be no assurance that we will be successful in defending against these allegations or in reaching a business resolution that is satisfactory to us.
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• regulatory constraints on rate increases;
−Removed: • our failure to accurately estimate investment yields and the duration of our liability for loss and loss adjustment expenses, as well as unanticipated court decisions, legislation or regulatory action.
+Added: • our failure to accurately estimate investment yields and the duration of our liability for loss and LAE, as well as unanticipated court decisions, legislation or regulatory action.
To address the potential inadequacy of our current business model, we may be compelled to increase the amount allocated to cover policy claims, increase premium rates or adopt tighter underwriting standards, any of which may result in a decline in new business and renewals and, as a result, could have a material adverse effect on our business, results of operations and financial condition.
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These guaranty associations generally pay these claims by assessing solvent insurers proportionately based on each insurer's share of voluntary premiums written in the state.
−Removed: During the year ended December 31, 2020, the amount we contributed to such funds were immaterial, however, as we enter new states the amount we are required to contribute may increase materially.
+Added: During the year ended December 31, 2021, the amount we contributed to such funds were immaterial;
+Added: however, as we enter new states the amount we are required to contribute may increase materially.
Maximum contributions required by law in any one year vary by state.
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Significant assessments due to a rise in insurance insolvencies could have a material adverse effect on our financial condition and results of operations.
−Removed: Litigation and legal proceedings filed by or against us and our subsidiaries could have a material adverse effect on our business, results of operations and financial condition.
+Added: Litigation and legal proceedings filed by or against us and our subsidiaries, including shareholder litigation related to the initial public offering, could have a material adverse effect on our business, results of operations and financial condition, and may divert management’s attention and resources away from our business.
From time to time, we are subject to allegations, and may be party to litigation and legal proceedings relating to our business operations.
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As is typical in the insurance industry, we continually face risks associated with litigation of various types arising in the normal course of our business operations, including disputes relating to insurance claims under our policies as well as other general commercial and corporate litigation.
−Removed: Although we are not currently involved in any material litigation with our customers, members of the insurance industry are periodically the target of class action lawsuits and other types of litigation, some of which involve claims for substantial or indeterminate amounts, and the outcomes of which are unpredictable.
+Added: Although we do not believe that we are a party to any current or pending legal action that could reasonably be expected to have a material adverse effect on our financial condition or results of operations and cash flow, members of the insurance industry are periodically the target of class action lawsuits and other types of litigation, some of which involve claims for substantial or indeterminate amounts, and the outcomes of which are unpredictable.
This litigation is based on a variety of issues, including sale of insurance and claim settlement practices.
1 unchanged sentence
We cannot predict with any certainty whether we will be involved in such litigation in the future or what impact such litigation would have on our business.
−Removed: If we were to be involved in litigation and it was determined adversely, it could require us to pay significant damages or to change aspects of our operations, either of which could have a material adverse effect on our financial results.
+Added: If we were to be involved in litigation and it was determined adversely, it could require us to
+Added: pay significant damages or to change aspects of our operations, either of which could have a material adverse effect on our financial results.
Even claims without merit can be time-consuming and costly to defend and may divert management’s attention and resources away from our business and adversely affect our business, results of operations and financial condition.
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We cannot predict with certainty the costs of defense, the costs of prosecution, insurance coverage or the ultimate outcome of litigation or other proceedings filed by or against us, including remedies or damage awards, and adverse results in such litigation, and other proceedings may harm our business and financial condition.
+Added: Additionally, on May 19, 2021, a purported class action complaint was filed against the Company and certain of its current officers and directors in the U.S.
+Added: District Court for the Southern District of Ohio (Case No.
+Added: 2:21-cv-01197) on behalf of certain Root shareholders alleging that defendants made false or misleading statements and omissions of purportedly material fact, in violation of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, or the Exchange Act, and Rule 10b-5 thereunder, and of Sections 11 and 15 of the Securities Act of 1933, or the Securities Act, in connection with and following the Company’s initial public offering.
+Added: This litigation can subject us to substantial costs and divert resources and the attention of management from our business.
+Added: If these claims are successful, our business could be seriously harmed.
+Added: Even if the claims do not result in protracted litigation or are resolved in our favor, the time and resources needed to resolve them could divert our management’s resources and seriously harm our business.
Our ability to utilize our net operating loss carryforwards may be limited.
−Removed: As of December 31, 2020, we had federal income tax net operating losses, or NOLs, of approximately $ 591.7 million available to offset our future taxable income, if any, prior to consideration of annual limitations that may be imposed under Section 382 of the Code, or otherwise.
−Removed: Of our federal NOLs, $ 339.4 million of losses will begin to expire in 2035 and $ 252.3 million of losses can be carried forward indefinitely.
+Added: As of December 31, 2021, we had federal income tax net operating losses, or NOLs, of approximately $1,042.6 million available to offset our future taxable income, if any, prior to consideration of annual limitations that may be imposed under Section 382 of the Internal Revenue Code, or the Code, or otherwise.
+Added: Of our federal NOLs, $496.1 million of losses will begin to expire in tax years 2035 through 2041 and $546.5 million of losses can be carried forward indefinitely.
We may be unable to fully use our NOLs, if at all.
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To the extent we are not able to offset future taxable income with our NOLs, our net income and cash flows may be adversely affected.
+Added: In 2021, the Company issued shares of Series A Preferred Stock to Carvana equal to 5% of the fully diluted shares outstanding in the Company at the time of issuance.
+Added: In addition, the Company issued to Carvana several tranches of warrants, which if exercised, would allow Carvana to acquire Class A Common Stock up to an additional 29.9% of fully diluted shares outstanding in the Company.
+Added: Carvana may elect, and the Company has the right to cause, any exercise of the warrants to be net settled.
+Added: As of the year ended December 31, 2021, Root has determined that Carvana’s initial investment will not trigger an ownership change under Section 382 of the Code.
+Added: The Company will continue to monitor ownership changes in the event Carvana exercises its warrants and any associated effect on the Company’s ability to utilize our NOLs.
The Tax Cuts and Jobs Act, or the Tax Act, as modified by the Coronavirus Aid, Relief, and Economic Security Act, or the CARES Act, among other things, includes changes to U.S.
1 unchanged sentence
For federal NOLs arising in tax years beginning after December 31, 2017, the Tax Act as modified by the CARES Act limits a taxpayer’s ability to utilize NOL carryforwards in taxable years beginning after December 31, 2020, to 80% of taxable income.
−Removed: In addition, federal NOLs arising in tax years beginning after December 31, 2017 can be carried forward indefinitely, but carryback of NOLs are generally permitted to the prior
−Removed: five taxable years only for NOLs arising in taxable years beginning before January 1, 2021 and after December 31, 2017.
+Added: In addition, federal NOLs arising in tax years beginning after
+Added: December 31, 2017 can be carried forward indefinitely, but carryback of NOLs are generally permitted to the prior five taxable years only for NOLs arising in taxable years beginning before January 1, 2021 and after December 31, 2017.
Deferred tax assets for NOLs will need to be measured at the applicable tax rate in effect when the NOLs are expected to be utilized.
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We are subject to extensive regulation and potential further restrictive regulation may increase our operating costs and limit our growth.
−Removed: We are subject to extensive laws and regulations by the individual state insurance departments in the states in which we transact business and the Cayman Island Monetary Authority as it pertains to our captive reinsurance company.
+Added: We are subject to extensive laws and regulations by the individual state insurance departments in the states in which we transact business and the CIMA as it pertains to our captive reinsurance company.
These laws and regulations are complex and subject to change.
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Several states have also adopted legislation prohibiting unfair methods of competition and unfair or deceptive acts and practices in the business of insurance as well as unfair claims practices.
−Removed: Prohibited practices include, but are not limited to, misrepresentations, false advertising, coercion, disparaging other insurers, unfair claims settlement
−Removed: procedures, and discrimination in the business of insurance.
−Removed: Noncompliance with any of such state statutes may subject us to regulatory action by the relevant state insurance regulator, and possibly private litigation.
+Added: Prohibited practices include, but are not limited to, misrepresentations, false advertising, coercion, disparaging other insurers, unfair claims settlement procedures, and discrimination in the business of insurance.
+Added: Noncompliance with any of such state statutes may
+Added: subject us to regulatory action by the relevant state insurance regulator, and possibly private litigation.
States also regulate various aspects of the contractual relationships between insurers and independent agents as well as, in certain states, insurers and third-party administrators.
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Failure to comply with federal requirements under the FCRA or any other applicable federal laws could subject us to regulatory fines and other sanctions.
−Removed: In addition, given our short operating history to-date and rapid rate of growth, we are vulnerable to regulators identifying errors in the policy forms we use, the rates we charge, with respect to our customer communications.
−Removed: As a result of such noncompliance, regulators could impose fines, rebates or other penalties, including cease-and-desist orders with respect to our operations in an individual state, or all states, until the identified noncompliance is rectified.
+Added: In addition, given our short operating history and rapid rate of growth, we are more vulnerable to regulators identifying errors in the policy forms we use, the rates we charge, with respect to our customer communications.
+Added: As a result of such noncompliance, regulators have in the past imposed non-material fines and penalties and could in the future impose fines, rebates or other penalties, including cease-and-desist orders with respect to our operations in an individual state, or all states, until the identified noncompliance is rectified.
In addition, there is risk that any particular regulator’s or enforcement authority’s interpretation of a legal issue or the scope of a regulator’s authority may change over time to our detriment.
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For example, state insurance laws are generally prescriptive with respect to the content and timeliness of notices we must provide policyholders.
−Removed: We recently became aware that we failed to comply with certain notice period timeliness requirements when cancelling a number of policies for nonpayment, as a result of which we could be liable for claims made under those policies.
−Removed: We are currently working to determine the exact extent to which cancellations were affected, and currently cannot predict with any certainty the impact these non-cancellations may have on our business, results of operations and financial condition, although this impact could be material.
Failure to comply with other state insurance laws and regulations in the future could also have a material adverse effect on our business, operating results and financial condition.
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Any such events could adversely affect our business, results of operations or financial condition.
−Removed: See the sections titled (i) “Regulation — Insurance Regulation”, (ii)
−Removed: “Regulation — Insurance Holding Company Regulation” and (iii) “Regulation — Required Licensing” for additional information.
+Added: See the sections titled (i) “Regulation — Insurance Regulation”, (ii) “Regulation — Insurance Holding Company Regulation” and (iii) “Regulation — Required Licensing” for additional information.
A regulatory environment that requires rate increases to be approved and that can dictate underwriting practices and mandate participation in loss sharing arrangements may adversely affect our results of operations and financial condition.
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Our success depends upon the insurance industry continuing to move online at its current pace and the continued growth and acceptance of online and mobile app-based products and services as effective alternatives to traditional offline products and services.
−Removed: We provide automobile, renters and homeowners insurance products through our website and our online and mobile apps that compete with traditional offline counterparts.
+Added: We provide automobile and renters insurance products through our websites and mobile apps, which compete with traditional offline insurance counterparts.
We do not offer insurance through traditional, offline brokers.
−Removed: We believe that the continued growth and acceptance of online products and services as well as those
−Removed: offered through mobile devices generally will depend, to a large extent, on the continued growth in commercial use of the internet and mobile apps, and the continued migration of traditional offline markets and industries online.
+Added: We believe that the continued growth and acceptance of online products and services as well as those offered through mobile devices generally will depend, to a large extent, on the continued growth in commercial use of the internet and mobile apps, and the continued migration of traditional offline markets and industries online.
Purchasers of insurance may develop the perception that purchasing insurance products online or through a mobile app is not as effective as purchasing such products through a broker or other traditional offline methods, and the insurance market may not migrate online as quickly as (or at the levels that) we expect.
−Removed: Moreover, if, for any reason, an unfavorable perception develops that telematics, mobile engagement, a technology-based platform and/or bots are less efficacious than traditional offline methods of purchasing insurance, underwriting, claims processing, and other functions that do not use data automation, artificial intelligence and/or bots, or that our processes lead to unfair outcomes, our business, results of operations and financial condition could be adversely affected.
−Removed: Our actual incurred losses and LAE may be greater than our loss and loss adjustment expense reserves, which could have a material adverse effect on our financial condition and results of operations.
+Added: Moreover, if, for any reason, an unfavorable perception develops that telematics, mobile engagement, a technology-based platform and/or
+Added: bots are less efficacious than traditional offline methods of purchasing insurance, underwriting, claims processing, and other functions that do not use data automation, artificial intelligence and/or bots, or that our processes lead to unfair outcomes, our business, results of operations and financial condition could be adversely affected.
+Added: Our actual incurred losses and LAE may be greater than our loss and LAE reserves, which could have a material adverse effect on our financial condition and results of operations.
Our financial condition and results of operations depend on our ability to accurately price risk and assess potential losses and LAE under the terms of the policies we underwrite.
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We base our estimates on our assessment of known facts and circumstances, as well as estimates of future trends in claim severity, claim frequency, judicial theories of liability, and other factors.
−Removed: These variables are affected by both internal and external events that could increase our exposure to losses, including changes in actuarial projections, claims handling procedures, inflation, severe weather, climate change, economic and judicial trends and legislative and regulatory changes.
+Added: These variables are affected by both internal and external events that could increase our exposure to losses, including changes in actuarial projections, claims handling procedures, inflation, severe weather, economic and judicial trends and legislative and regulatory changes.
+Added: Moreover, changing climate conditions, whether due to global climate change or other causes, may increase how often severe weather events and other natural disasters occur, how long they last, and how much insured damage they cause, and may change where the events occur.
We regularly monitor reserves using new information on reported claims and a variety of statistical techniques to update our current estimate.
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Our results of operations depend, in part, on the performance of our investment portfolio.
−Removed: We seek to hold a diversified portfolio of investments in accordance with our investment policy, which is routinely reviewed by the
−Removed: Audit Committee.
+Added: We seek to hold a diversified portfolio of investments in accordance with our investment policy, which is routinely reviewed by the Audit Committee.
However, our investments are subject to general economic and market risks as well as risks inherent to particular securities.
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While these limitations and exclusions help us assess and mitigate our loss exposure, it is possible that a court or regulatory authority could nullify or void a limitation or exclusion, or legislation could be enacted modifying or barring the use of such limitations or exclusions.
−Removed: These types of governmental actions could result in higher than anticipated losses and loss adjustment expenses, which could have a material adverse effect on our financial condition or results of operations.
+Added: These types of governmental actions could result in higher than anticipated losses and LAE, which could have a material adverse effect on our financial condition or results of operations.
In addition, court decisions, such as the 1995 Montrose decision in California could read policy exclusions narrowly so as to expand coverage, thereby requiring insurers to create and write new exclusions.
−Removed: Under insurance laws, the insurer typically has the burden of proving an exclusion applies and any ambiguities in the terms of a loss limitation or exclusion provision are
−Removed: typically construed against the insurer.
+Added: Under insurance laws, the insurer typically has the burden of proving an exclusion applies and any ambiguities in the terms of a loss limitation or exclusion provision are typically construed against the insurer.
These issues may adversely affect our business by either broadening coverage beyond our underwriting intent or by increasing the frequency or severity of claims.
−Removed: In some instances, these changes may not become apparent until sometime after we have issued insurance contracts that are affected by the changes.
+Added: In some instances, these changes may not become
+Added: apparent until sometime after we have issued insurance contracts that are affected by the changes.
As a result, the full extent of liability under our insurance contracts may not be known for many years after a contract is issued.
Risks Related to Ownership of Our Class A Common Stock
+Added: Failure to meet the continued listing requirements of Nasdaq could result in delisting of our Class A common stock, which in its turn would negatively affect the price of our Class A common stock and limit investors’ ability to trade in our common stock.
+Added: Our common stock trades on Nasdaq.
+Added: Nasdaq rules impose certain continued listing requirements, including the minimum $1 bid price, corporate governance standards and number of public stockholders.
+Added: At February 22, 2022, our closing price was $1.54.
+Added: If we fail to meet these continued listing requirements, Nasdaq may take steps to delist our Class A common stock.
+Added: If our Class A common stock is delisted from The Nasdaq Global Select Market, we could face significant material adverse consequences, including:
+Added: • a limited availability of market quotations for our Class A common stock;
+Added: • a reduced liquidity with respect to our Class A common stock;
+Added: • a determination that shares of our Class A common stock are a “penny stock,” which will require broker-dealers trading in our Class A common stock to adhere to more stringent rules, possibly resulting in a reduced level of trading activity in the secondary trading market for our Class A common stock;
+Added: • a limited amount of news and analyst coverage for our company;
+Added: • a limited ability to issue additional securities or obtain additional financing in the future.
The dual class structure of our common stock will have the effect of concentrating voting control with our executive officers, directors and their affiliates, which will limit your ability to influence the outcome of important transactions.
Our Class B common stock has ten votes per share and our Class A common stock has one vote per share.
−Removed: As of December 31, 2020, holders of our Class B common stock collectively beneficially own shares representing approximately 97.0% of the voting power of our outstanding capital stock.
+Added: As of February 17, 2022, holders of our Class B common stock collectively beneficially own shares representing approximately 85.6% of the voting power of our outstanding capital stock.
Our directors and executive officers and their affiliates collectively beneficially own, in the aggregate, shares representing approximately 56.4% of the voting power of our outstanding capital stock.
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Applicable law provides for a rebuttable presumption of “control” by any person which owns or acquires, directly or indirectly, 10% or more of the voting stock of the insurance company, and a person must seek regulatory approval from the superintendent of the supervisory DOI prior to acquiring direct or indirect “control” of a domestic insurer by filing a Form A Statement Regarding the Acquisition of Control of or Merger with a Domestic Insurer, or Form A.
−Removed: As part of this Form A application, the entity acquiring control (as well as any controlling shareholders of such entity) will need to submit, along with other documents and disclosures, its financial statements, organizational charts and biographical affidavits for any officers, directors and controlling shareholders of each applicable entity.
+Added: As part of this Form A
+Added: application, the entity acquiring control (as well as any controlling shareholders of such entity) will need to submit, along with other documents and disclosures, its financial statements, organizational charts and biographical affidavits for any officers, directors and controlling shareholders of each applicable entity.
Would-be acquirers may find these requirements burdensome, which could deter potential acquisition proposals and may serve to delay or prevent change of control transactions, including transactions that some or all of the stockholders might consider to be desirable.
These requirements may also inhibit our ability to acquire an insurance company should we wish to do so in the future.
−Removed: We are an emerging growth company, and we cannot be certain if the reduced reporting requirements applicable to emerging growth companies will make our Class A common stock less attractive to investors.
−Removed: We are an emerging growth company, as defined in the JOBS Act.
−Removed: For as long as we continue to be an emerging growth company, we may take advantage of exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and exemptions from the requirements of holding nonbinding advisory votes on executive compensation and stockholder approval of any golden parachute payments not previously approved.
−Removed: We could be an emerging growth company for up to five years following the year in which we completed our IPO, although circumstances could cause us to lose that status earlier.
−Removed: We will remain an emerging growth company until the earlier of (1) the last day of the fiscal year (a) following the fifth anniversary of the completion of our IPO, (b) in which we have total annual gross revenue of at least $1.07 billion or (c) in which we are deemed to be a large accelerated filer, which requires the market value of our Class A common stock that is held by non-affiliates to exceed $700 million as of the prior June 30 th , and (2) the date on which we have issued more than $1 billion in non-convertible debt during the prior three-year period.
−Removed: Under the JOBS Act, emerging growth companies can also delay adopting new or revised accounting standards until such time as those standards apply to private companies.
−Removed: We have elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date we (i) are no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act.
−Removed: As a result, our financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.
−Removed: If some investors find our Class A common stock less attractive as a result, there may be a less active trading market for our Class A common stock, and our stock price may be more volatile.
We do not intend to pay dividends on our Class A common stock so any returns will be limited to the value of our stock.
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We will incur significant increased costs as a result of operating as a public company, and our management will be required to devote substantial time to new compliance initiatives.
−Removed: As a public company, we are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, or the Exchange Act, the Sarbanes-Oxley Act, the Dodd–Frank Act, the listing requirements of Nasdaq, and other applicable securities rules and regulations.
−Removed: Despite reforms made possible by the JOBS Act, compliance with these rules and regulations will nonetheless increase our legal, accounting, investor relations, financial and other costs and expenses, make some activities more difficult, time-consuming or costly and increase demand on our systems and resources, particularly after we are no longer an emerging growth company.
+Added: As a public company, we are subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act, the Dodd-Frank Act, the listing requirements of Nasdaq, and other applicable securities rules and regulations.
+Added: Compliance with these rules and regulations have and may continue to increase our legal, accounting, investor relations, financial and other costs and expenses, make some activities more difficult, time-consuming or costly and increase demand on our systems and resources, particularly now that we are no longer an emerging growth company.
The Exchange Act requires, among other things, that we file annual, quarterly and current reports with respect to our business and operating results.
2 unchanged sentences
government intervention and regulatory reform may also lead to substantial new regulations and disclosure obligations, which may in turn lead to additional compliance costs and impact the manner in which we operate our business in ways we do not currently anticipate.
−Removed: Our management and other personnel will need to devote a substantial amount of time to comply with these requirements.
+Added: Our management and other personnel devote a substantial amount of time to comply with these requirements.
Moreover, these requirements will increase our legal and financial compliance costs and will make some activities more time-consuming and costly.
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Pursuant to Section 404 of the Sarbanes-Oxley Act, we are required to furnish a report by our management on our internal control over financial reporting, including an attestation report on internal control over financial reporting issued by our independent registered public accounting firm.
−Removed: However, while we remain an emerging growth company, we will not be required to include an attestation report on internal control over financial reporting issued by our independent registered public accounting firm.
−Removed: The rules governing the standards that must be met for management to assess our internal control over financial reporting are complex and require significant documentation, testing and possible remediation.
+Added: The rules governing the standards that must
+Added: be met for management to assess our internal control over financial reporting are complex and require significant documentation, testing and possible remediation.
To comply with the Sarbanes-Oxley Act, the requirements of being a reporting company under the Exchange Act and any complex accounting rules in the future, we may need to upgrade our information technology systems;
1 unchanged sentence
and hire additional accounting and finance staff.
−Removed: We are currently in the process of hiring additional accounting and finance staff as we grow our business.
If we are unable to hire the additional accounting and finance staff necessary to comply with these requirements, we may need to retain additional outside consultants.
35 unchanged sentences
While we maintain directors’ and officers’ liability insurance, such insurance may not be adequate to cover all liabilities that we may incur, which may reduce our available funds to satisfy third-party claims and may adversely impact our cash position.
−Removed: Our amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware and the federal district courts of the United States of America are the exclusive forums for substantially
−Removed: all disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, or employees.
+Added: Our amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware and the federal district courts of the United States of America are the exclusive forums for substantially all disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, or employees.
Our amended and restated certificate of incorporation provide that the Court of Chancery of the State of Delaware (or, if and only if the Court of Chancery of the State of Delaware lacks subject matter jurisdiction, any state court located within the State of Delaware or, if and only if all such state courts lack subject matter jurisdiction, the federal district court for the District of Delaware) is the exclusive forum for the following claims or causes of action under Delaware statutory or common law:
17 unchanged sentences
In the future we may pursue acquisitions or investments that we believe will help us achieve our strategic objectives.
−Removed: There is no assurance that such acquisitions or investments will perform as expected or will be successfully integrated into our business or generate substantial revenue, and we may overestimate cash flow, underestimate costs or fail to understand the risks of or of related to any investment or acquired business.
−Removed: The process of acquiring a business, product or technology can also cause us to incur various expenses and create
−Removed: unforeseen operating difficulties, expenditures and other challenges, whether or not those acquisitions are consummated, such as:
+Added: There is no assurance that such acquisitions or investments will perform as expected or will be successfully integrated into our business or generate substantial revenue, and we may overestimate cash flow, underestimate costs or fail to understand the risks of or related to any investment or acquired business.
+Added: The process of acquiring a business, product or technology can also cause us to incur various expenses and create unforeseen operating difficulties, expenditures and other challenges, whether or not those acquisitions are consummated, such as:
• intense competition for suitable acquisition targets, which could increase prices and adversely affect our ability to consummate deals on favorable or acceptable terms;
−Removed: • inadequacy of reserves for losses and loss adjustment expenses;
+Added: • inadequacy of reserves for losses and LAE;
• failure or material delay in closing a transaction, including as a result of regulatory review and approvals;
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Fluctuations and variability across the industry may also affect our revenue.
−Removed: As a result, comparing our results of operations on a period-to-period basis may not be meaningful, and the results of any one period should not be relied on as an indication of future performance.
+Added: As a result, comparing our results of
+Added: operations on a period-to-period basis may not be meaningful, and the results of any one period should not be relied on as an indication of future performance.
Our results of operations may not meet the expectations of investors or public market analysts who follow us, which may adversely affect our stock price.
19 unchanged sentences
If we fail to anticipate the impact on our business of changing technology, including automotive technology, our ability to successfully operate may be materially impaired.
−Removed: Our business could also be affected by potential technological changes, such as autonomous or partially autonomous vehicles or technologies that facilitate ride, car
−Removed: or home sharing, or vehicles with built-in telematics features.
+Added: Our business could also be affected by potential technological changes, such as autonomous or partially autonomous vehicles or technologies that facilitate ride, car or home sharing, the more widespread adoption of electric vehicles (including potentially as a result of climate change or regulatory responses to it), or vehicles with built-in telematics features.
Such changes could disrupt the demand for products from current customers, create coverage issues or impact the frequency or severity of losses, or reduce the size of the automobile insurance market, causing our business to decline.
4 unchanged sentences
We are unable to predict the timing of or the effect that such sales may have on the prevailing market price of our Class A common stock.
−Removed: In connection with our IPO, all of our directors and officers and the holders of a substantial majority all of our capital stock and securities convertible into our capital stock entered into lock-up agreements that restricted their ability to transfer shares of our capital stock.
−Removed: At midnight on March 7, 2021, most of the shares are expected to be released from the lock-up agreements and become eligible for immediate sale in the public market at the open of trading on March 8, 2021, in each case subject to trading limitations on shares held by our affiliates, continued vesting of any unvested equity awards as of such date, and our insider trading policies.
−Removed: As a result, a substantial number of shares of our Class A common stock will become eligible for sale in the public market in early March 2021.
Unresolved Staff Comments
Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.