American Well (AMWL) Risk Analysis

For so long as any shares of our Class B common stock remain outstanding, our Founders will at all times hold at least 51% of the voting power of the Company. As a result, our Founders together will control all matters submitted to our stockholders for approval, including director elections, mergers, asset sales and other significant transactions. Even if a Founder's Class B shares are converted into Class A shares, their combined voting power would still exceed 51% so long as Class B shares remain outstanding, thereby diluting the relative influence of Class A common stockholders. This concentrated control may limit your ability to influence corporate matters and could adversely affect the market price and liquidity of our Class A common stock. Additionally, our Founders' control may enable them to make strategic decisions, pursue acquisitions or adopt corporate governance practices that may not be in the best interest of other stockholders. Provisions in our certificate of incorporation and by-laws—including those authorizing multiple classes of common stock, staggered board elections, and various restrictions on stockholder actions—may further entrench our management and limit opportunities for a change of control.

We may acquire or invest in other companies, software products, services or technologies that we believe could complement or expand our solution. However, such acquisitions or investments could divert our management’s attention, result in dilution to our stockholders, and disrupt our operations. We may face difficulties identifying attractive opportunities, completing transactions on acceptable terms, and integrating any acquisitions successfully. Even if we complete an acquisition, there is no assurance that the acquired business will provide the anticipated benefits. Potential challenges include the inability to integrate new technologies, unanticipated costs or liabilities, difficulties aligning disparate operations and accounting systems, diversion of management attention and adverse effects on our existing client relationships.

Our success depends in part on our ability to maintain, protect and enforce our intellectual property and proprietary rights. We rely upon a combination of patent, trademark and trade secret laws, as well as license and access agreements and other contractual provisions, to protect our patent portfolio and other intellectual property. However, these laws, procedures and agreements provide only limited protection, and our intellectual property rights may be challenged, invalidated, circumvented, infringed, diluted or misappropriated. We attempt to protect our intellectual property and proprietary information by requiring our employees, consultants and certain contractors to execute confidentiality and assignment of inventions agreements. Despite these measures, we may not obtain these agreements in all circumstances or the individuals may not fully comply with their terms. Should any of our intellectual property rights be compromised, our competitive position could be harmed.

We rely on data center providers, Internet infrastructure, bandwidth providers, third-party computer hardware and software, other third parties and our own systems for providing services to our clients and consumers, and any failure or interruption in the services provided by these third parties or our own systems could expose us to litigation and negatively impact our relationships with clients, adversely affecting our brand and our business. We serve all of our U.S. based clients and consumers from two geographically dispersed data centers. While we control and have access to our servers, we do not control the operation of these facilities. The owners of our data center facilities have no obligation to renew their agreements with us on commercially reasonable terms, or at all. If we are unable to renew these agreements on commercially reasonable terms, or if one of our data center operators is acquired, we may be required to transfer our servers and other infrastructure to new facilities, which could incur significant costs and possible service interruptions. Problems faced by our third-party data center locations with telecommunications network providers, or with the systems by which our providers allocate capacity to clients, could adversely affect the experience of our clients and consumers. Additionally, if our data centers fail to keep up with our growing capacity needs, rapid business expansion could affect service levels or cause system failures. Any changes in third-party service levels at our data centers or any disruptions with our solution could adversely affect our reputation, damage clients’ and consumers’ data, result in lengthy service interruptions, reduce our revenue, force us to offer refunds or subject us to potential liability, and adversely affect client renewal rates. Furthermore, our ability to deliver our Internet-based services depends on the development and maintenance of the Internet infrastructure by third parties. Should catastrophic events or other disruptions occur, we could experience extended system unavailability, which would negatively impact our business.

The digital care market is still developing and volatile and may develop slower than we expect and be subject to negative publicity. The digital care market is relatively new and unproven, and it is uncertain whether it will achieve and sustain high levels of demand, consumer acceptance and market adoption. Our success will depend to a substantial extent on the willingness of our clients’ members or patients to use, and to increase the frequency and extent of their utilization of, our services, as well as on our ability to demonstrate the value of digital care to employers, health plans, government agencies and other purchasers of healthcare for beneficiaries. Negative publicity concerning our services or the digital care market as a whole could limit market acceptance of our services. For example, there has been and continue to be substantial media coverage in the U.S. surrounding mental health and virtual health services, including the virtual prescription of mental health prescription drugs. Similarly, individual and healthcare industry concerns or negative publicity regarding patient confidentiality and privacy in the context of digital care could limit market acceptance of our healthcare services. If our clients, or their members or patients, do not perceive the benefits of our services, or if our services are not competitive, then our market may not develop at all, or it may develop more slowly than we expect. If any of these events occurs, it could have a material adverse effect on our business, financial condition or results of operations. Rapid technological change in our industry presents us with significant risks and challenges. The digital care market is characterized by rapid technological change, changing consumer requirements, short product lifecycles and evolving industry standards. Our success will depend on our ability to enhance our solution with next-generation technologies and to develop or to acquire and market new services to access new consumer populations. There is no guarantee that we will possess the resources, either financial or personnel, for the research, design and development of new applications or services, or that we will be able to utilize these resources successfully and avoid technological or market obsolescence. Further, there can be no assurance that technological advances by one or more of our competitors or future competitors will not result in our present or future software-based products and services becoming uncompetitive or obsolete. We operate in a competitive industry and may not be able to compete effectively. While the digital care market is in an early stage of development, it is competitive and we expect it to attract increased competition, which could make it difficult for us to succeed. We currently face competition in the digital care delivery market from a range of companies, including specialized software and solution providers that offer similar solutions, often at substantially lower prices, and that are continuing to develop additional products and becoming more sophisticated and effective. Our competitors in the digital care delivery market range from traditional digital care players such as Teladoc, Included Health and MDLive; video communications players such as Zoom or Microsoft Teams; physician networks or tools such as Doximity and Caregility; technology companies such as Amazon; and EHR players (which are also partners) such as Epic, Cerner, Allscripts and athenahealth. Competition could result in continued pricing pressures, which is likely to lead to price declines in certain product segments, which could negatively impact our sales, profitability and market share. Some of our competitors may have greater name recognition, longer operating histories and significantly greater resources than we do. Further, our current or potential competitors may be acquired by third parties with greater available resources. As a result, our competitors may be able to respond more quickly and effectively than we can to new or changing opportunities, technologies, standards or client requirements and may have the ability to initiate or withstand substantial price competition. In addition, current and potential competitors have established, and may in the future establish, cooperative relationships with vendors of complementary products, technologies or services to increase the availability of their solutions in the marketplace. Accordingly, new competitors or alliances may emerge that have greater market share, a larger client base, more widely adopted proprietary technologies, greater marketing expertise, greater financial resources and larger sales forces than we have, which could put us at a competitive disadvantage. Our competitors could also be better positioned to serve certain segments of the digital care market, which could create additional price pressure. In addition, many healthcare provider organizations are consolidating to create integrated healthcare delivery systems with greater market power. As provider networks and managed care organizations consolidate, thus decreasing the number of market participants, competition to provide products and services like ours could become more intense, and the importance of establishing and maintaining relationships with key industry participants could increase. These industry participants may try to use their market power to negotiate price reductions for our products and services. In light of these factors, even if our solution is more effective than those of our competitors, current or potential clients may accept competitive solutions in lieu of purchasing our solution. If healthcare reform legislation and other changes in the healthcare industry and in healthcare spending occur, our revenue may be adversely affected. Our revenue is dependent on the healthcare industry and could be affected by changes in healthcare spending, reimbursement and policy. Initiatives at the United States federal and state levels may further reduce payments and alter reimbursement dynamics. We expect that additional state and federal healthcare reform measures will be adopted in the future, any of which could limit the amounts paid for healthcare products and services, which could adversely affect our business, financial condition and results of operations. If growth in the number of individuals covered by our health systems and health plans decreases, or if the number of products or services that we are able to sell to our clients decreases due to legal, economic or business developments, our revenue will likely decrease. In addition, if our existing clients fail to renew their contracts or renew on less favorable terms, our revenue may decline or future revenue growth may be constrained. Additional factors that could affect our ability to sell products and services include failure of our clients to be successful in offering our products, changes in the nature or operations of our clients, price, performance and functionality of our solution, our development and introduction of additional or improved solutions and our clients’ acceptance of such solutions, availability, price, performance and functionality of competing solutions, our ability to develop and sell complementary products and services, stability of our hosting infrastructure, changes in healthcare laws, regulations or trends, and the business environment of our clients, including headcount reductions. In addition, our marketing efforts depend significantly on our ability to call upon our current clients to provide positive references to new, potential clients. Given our limited number of long-term clients, the loss or dissatisfaction of any client could substantially harm our brand and reputation, inhibit widespread adoption of our solution and impair our ability to attract new clients. Any such consequences could lower client retention rates and have a material adverse effect on our business, financial condition and results of operations.