Risk Factors

An investment in securities involves a high degree of risk. All investors should carefully consider the following factors in addition to the other information in this investor relations website before investing in Smiles’ securities. In general, investing in the securities of issuers in emerging market countries, such as Brazil, involves a higher degree of risk than investing in the securities of U.S. issuers or issuers in other countries with highly developed capital markets. Smiles’ business, financial condition, results of operations and prospects may be materially adversely affected by any of these risks.

The risks briefly described below are those that the Company currently believes most likely may materially affect its performance.

1) Risks Related to Brazil

  • The Brazilian government exercises significant influence over the Brazilian economy. This influence, as well as Brazilian political and economic conditions, could adversely affect the Company;
  • Exchange rate instability may adversely affect Smiles and the trading price of Company’s common shares;
  • Government efforts to combat inflation may hinder the growth of the Brazilian economy and could adversely affect the Company;
  • Developments and the perception of risk in other countries may adversely affect the market price of Brazilian securities, including Company’s common shares.

2) Risks Related to Smiles’ Business

  • The success of Smiles’ business is highly dependent on Gol, which, acting through VRG, Company’s commercial partner and a related party under common control, is responsible for providing air transport services for Gol. Factors affecting Gol and VRG or the airline industry in general could adversely affect Smiles’ business, financial condition and results of operations;
  • Smiles is highly dependent on main commercial partners for a significant portion of the sales. Any disruption in relationships with these commercial partners, any event that has a negative effect on their results, or the termination or Company’s inability to renew any of commercial agreements could materially and adversely affect the business, financial condition and results of operations;
  • Smiles may not recover amounts that will prepay to VRG to purchase reward tickets in certain circumstances;
  • Company may be deemed successors to VRG’s obligations in relation to the Smiles Program, as VRG performed these activities prior to the commencement of Smiles’ activities;
  • Smiles’ business may be adversely affected in the event the commercial partners change their policies in relation to granting benefits to their clients;
  • Any failure to safeguard Company’s database, which contains confidential information on the members, could adversely affect Smiles’ reputation and expose the Company to legal claims;
  • Smiles is subject to a variety of laws and regulations, and a material change in them or their interpretation or enforcement could materially and adversely affect the business, financial condition and results of operations;
  • Any loss of Company’s data or call center capacity, system failures or malfunctions, interruption of telecommunication links, fraud, computer viruses or inability to use software licensed to the Company could adversely affect the ability to meet the needs of Smiles’ commercial partners and members;
  • Smiles was formed recently and have limited experience operating as an independent company;
  • The Company may face increased administrative expenses as a result of operating as an independent company;
  • The carve-out financial statements and unaudited pro forma financial information for the Smiles Program may not be representative of the results as an independent company;
  • Any loss of members of Smiles’ management team or failure to attract and retain qualified personnel could have an adverse effect on the Company;
  • If actual redemptions by members are greater than expected, or if the costs related to redemption of reward miles increase unexpectedly, Company’s profitability could be adversely affected;
  • Smiles may face unfunded future redemption costs;
  • Company may have conflicts of interest with the controlling shareholder, Gol;

3) Risks Related to Smiles’ Common Shares

  • There may be conflicts of interest between Smiles and the controlling shareholder;
  • The sale of a significant number of Company’s shares after the closing of this offering may adversely affect the market price of Smiles’ shares;
  • The participation of institutional investors considered related parties in the bookbuilding process may adversely affect the liquidity and price of Smiles’ common shares;
  • An active and liquid market for Smiles’ common shares may not develop. The volatility and illiquidity of the Brazilian securities market may substantially limit the ability of investors to sell the shares at their preferred time and price;
  • A U.S. holder of Smiles’ common shares may be unable to exercise preemptive rights and tag along rights relating to the common shares;