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If we are unable to maintain effective internal control over financial reporting in the future, investors may lose confidence in the
accuracy and completeness of our financial reports and the trading price of our Class A common stock may be negatively affected.
We are subject to Section 404 of the Sarbanes-Oxley Act (SOX), which requires us to maintain internal controls over financial
reporting and to report any material weaknesses in such internal controls. We have consumed and will continue to consume management
resources and incur expenses for SOX compliance on an ongoing basis. If we identify material weaknesses in our internal control
over financial reporting, or if we are unable to comply with the requirements of Section 404 in a timely manner or assert that our
internal control over financial reporting is effective, investors may lose confidence in the accuracy and completeness of our financial
reports and the trading price of our Class A common stock could be negatively affected, and we could become subject to investigations
by the stock exchange on which our securities are listed, the Securities and Exchange Commission (SEC), or other regulatory authorities,
which could require additional financial and management resources.
The requirements of being a public company may strain our resources and divert management's attention.
We also are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, the Dodd-Frank Act,
the listing requirements of the NASDAQ Global Select Market, and other applicable securities rules and regulations. Compliance
with these rules and regulations has increased and likely will continue to increase our legal and financial compliance costs, make
some activities more difficult, time-consuming, or costly, and increase demand on our systems and resources. As a result, management's
attention may be diverted from other business concerns, which could harm our business and operating results.
In addition, complying with public disclosure rules makes our business more visible, which we believe may result in threatened
or actual litigation, including by competitors and other third parties. If such claims are successful, our business and operating results
could be harmed, and even if the claims do not result in litigation or are resolved in our favor, these claims, and the time and resources
necessary to resolve them, could divert the resources of our management and harm our business and operating results.
The dual class structure of our common stock and the voting agreements among certain stockholders have the effect of concentrating
voting control with our CEO, and also with certain employees and directors and their affiliates; this will limit or preclude your
ability to influence corporate matters.
Our Class B common stock has ten votes per share, and our Class A common stock has one vote per share. Stockholders who
hold shares of Class B common stock, including certain of our executive officers, employees, and directors and their affiliates, together
hold a substantial majority of the voting power of our outstanding capital stock. Because of the ten-to-one voting ratio between our
Class B and Class A common stock, the holders of our Class B common stock collectively control a majority of the combined voting
power of our common stock and therefore are able to control all matters submitted to our stockholders for approval so long as the
shares of Class B common stock represent at least 9.1% of all outstanding shares of our Class A and Class B common stock. This
concentrated control will limit or preclude your ability to influence corporate matters for the foreseeable future.
Transfers by holders of Class B common stock will generally result in those shares converting to Class A common stock, subject
to limited exceptions, such as certain transfers effected for estate planning or charitable purposes. The conversion of Class B common
stock to Class A common stock will have the effect, over time, of increasing the relative voting power of those holders of Class B
common stock who retain their shares in the long term. If, for example, Mr. Zuckerberg retains a significant portion of his holdings
of Class B common stock for an extended period of time, he could, in the future, continue to control a majority of the combined voting
power of our Class A common stock and Class B common stock.
We have elected to take advantage of the "controlled company" exemption to the corporate governance rules for NASDAQ-listed
companies, which could make our Class A common stock less attractive to some investors or otherwise harm our stock price.
Because we qualify as a "controlled company" under the corporate governance rules for NASDAQ-listed companies, we are
not required to have a majority of our board of directors be independent, nor are we required to have a compensation committee or
an independent nominating function. In light of our status as a controlled company, our board of directors determined not to have an
independent nominating function and chose to have the full board of directors be directly responsible for nominating members of our
board, and in the future we could elect not to have a majority of our board of directors be independent or not to have a compensation
committee. Accordingly, should the interests of our controlling stockholder differ from those of other stockholders, the other
stockholders may not have the same protections afforded to stockholders of companies that are subject to all of the corporate governance
rules for NASDAQ-listed companies. Our status as a controlled company could make our Class A common stock less attractive to
some investors or otherwise harm our stock price.
Delaware law and provisions in our restated certificate of incorporation and bylaws could make a merger, tender offer, or proxy
contest difficult, thereby depressing the trading price of our Class A common stock.
Our status as a Delaware corporation and the anti-takeover provisions of the Delaware General Corporation Law may discourage,