A.[Reserved]
B.Capitalization and Indebtedness
Not applicable.
C.Reasons for the Offer and Use of Proceeds
Not applicable.
D.Risk Factors
You should carefully consider the risks described below. Additional risks not presently known to us or that we currently deem immaterial may also impair our business operations. Our business, prospects, financial condition or results of operations could be materially and adversely affected by any of these risks. This annual report also contains forward-looking statements that involve risks and uncertainties. You should carefully review the “Cautionary Statement Regarding Forward-Looking Statements.” Our actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including the risks faced by us described below and elsewhere in this annual report.
RISK FACTOR SUMMARY
Risks Relating to Our Business and Industry
● We have incurred significant losses in the past and are likely to continue to incur losses as we continue to invest in order to grow, and we may not achieve operational profitability going forward.
● Our expansion into new products, services, technologies, geographies and markets subjects us to additional risks, and we may not be able to manage our growth and expansion efficiently or effectively scale and adapt our existing infrastructure.
● We may fail to maintain or improve our technology infrastructure, or adopt and apply technological advances, including, but not limited to, generative AI, which could materially and adversely affect our business, financial condition, results of operations and cash flows, and the use of new technologies may expose us to increased risks.
● If we fail to maintain and enhance our brand or network effects from our established Marketplace, our business, results of operations and financial condition may be materially and adversely affected.
● We operate in competitive markets, and in the future we may not be able to compete effectively.
● Failed deliveries, excessive returns and other logistics issues may adversely affect our business, financial condition, results of operations and cash flows.
10
Table of Contents
● If we fail to retain current customers and merchants or grow or maintain the level of their engagement, our business, financial condition, prospects and results of operations could be materially and adversely affected.
● We may need to raise additional funds to finance our future capital needs, including investing in growth and technology, which may prevent us from growing our business.
● Changes in our share ownership or other types of default could result in our inability to draw loans or cause acceleration or events of default under our indebtedness.
● A significant disruption in internet access, telecommunications networks or our IT platform may cause slow response times or otherwise impair our customers’ experience, which may in turn reduce traffic to our mobile apps and websites and significantly harm our business, financial condition and results of operations.
● We may experience significant fluctuations in our results of operations and growth rate.
● Any occurrence of natural disasters, earthquakes, epidemics, pandemics, civil unrest and wars or other outbreaks, or other catastrophic events could also materially and adversely affect our business, financial condition, results of operations or cash flows.
● A cybersecurity incident impacting our systems or the systems of our service providers, including undetected software errors and hacking, may cause material delays or interruptions in our information systems and may reduce the use of our services and damage our brand reputation, which may hinder our ability to conduct our business effectively or result in lost revenues or other costs, including in connection with increasing compliance requirements.
● Unauthorized disclosure of sensitive or confidential customer information or our failure, or the perception by our users that we failed, to comply with privacy laws or properly address privacy concerns could harm our business and reputation with customers, merchants and suppliers.
● Hepsipay is subject to a number of risks that, if they were to occur, could materially and adversely affect our growth in the financial technologies market in Türkiye.
● We are subject to credit risk of our borrowers in relation to our Buy-Now-Pay-Later solution and consumer finance loan offering.
● We are subject to payment-related risks.
● We may suffer losses relating to the products we sell through our Direct Sales business.
● We rely on many service providers in our business, and the nonperformance or loss of a significant third-party provider through bankruptcy, consolidation or otherwise could adversely affect our operations.
● We operate platforms that include third parties over whose actions we have only partial control.
● If we are unable to compete effectively for advertising spend, or if our merchants reduce advertising spend, our business and results of operations could be materially harmed.
● Our strategic acquisitions may result in operational challenges, and the failure of an acquisition or investment to produce the anticipated results or the inability to fully integrate an acquired company could have an adverse impact on our business, results of operations and financial condition.
● We may use open source code in a manner that could be harmful to our business.
11
Table of Contents
● Our operating metrics and competitive information, both internally calculated and provided by third parties and included in this annual report, have changed and may in the future change from time to time, and may be calculated differently from the metrics or competitive information published by our competitors or other third parties in our industry and any perceived inaccuracies or inadequate cross-company comparisons may harm our reputation.
● We may not be able to, or may choose not to, insure against all risks we face and may incur losses not covered by insurance, which could have a material adverse effect on our business, financial condition, results of operations, cash flows and prospects.
● We depend upon our senior management, our IT specialists and other talented employees to grow, operate and improve our business; if we fail to attract, retain and motivate key personnel, our business could be adversely affected.
● Employee misconduct or inadvertent mistakes are difficult to determine and detect and could harm our reputation and business.
● We face uncertainties relating to the growth and profitability of the e-commerce industry in our region and we may face challenges and uncertainties in implementing our e-commerce strategy.
● Our business would be adversely affected if last-mile delivery service carriers were classified as employees instead of independent contractors or if other regulatory requirements are imposed on such service carriers and the businesses that utilize their services, and we may incur significant additional expenses if the employees of subcontractors carrying out delivery services are considered our employees or if such service carriers do not fully comply with regulatory requirements applicable to them.
Legal and Regulatory Risks
● We are subject to tax audits that may result in additional tax liabilities and are exposed to changes in tax laws and regulations as well as their interpretation and implementation, including Türkiye’s digital service tax and one-off taxes, which could subject us to new liabilities in the future.
● We have in the past been, and may again in the future be, subject to administrative fines imposed by the Turkish Competition Authority, and our reputation may be harmed if we do not comply with Turkish competition laws and regulations or any applicable binding commitments imposed by the Turkish Competition Authority on the Company.
● We are subject to extensive laws and government regulations across our business, and changes to these laws or any actual or perceived failure by us to comply with such laws and regulations could materially and adversely affect our business, financial condition, results of operations or cash flows.
● We are subject to laws and government regulations applicable to payment services and consumer finance businesses, and changes to these laws or any actual or perceived failure by us to comply with such laws and regulations could materially and adversely affect our business, financial condition, results of operations or cash flows.
● We are subject to laws and government regulations relating to competition and antitrust, and changes to these laws or any actual or perceived failure by us to comply with such laws and regulations could materially and adversely affect our business, financial condition, results of operations or cash flows.
● We are subject to laws and government regulations relating to postal services, which include authorization requirements applicable to delivery, courier and logistics-related activities and changes to these laws or any actual or perceived failure by us to comply with such laws and regulations could materially and adversely affect our business, financial condition, results of operations or cash flows.
● We have in the past been, and may again in the future be, subject to administrative fines imposed by the Personal Data Protection Authority, and our reputation may be harmed if we do not comply with Turkish Personal Data Protection Law No. 6698.
12
Table of Contents
● If we fail to obtain intellectual property rights protection or adequately protect our intellectual property rights, or if we infringe third-party intellectual property rights, our business, prospects, financial condition and results of operations could be adversely affected.
● In connection with our technological operations, we may be subject to intellectual property infringement claims brought against us by others, which are costly to defend and could result in significant damage awards.
● We have been and in the future may be involved in litigation, some of which could be material.
● We may be impacted by fraudulent or unlawful activities of merchants, which could have a material adverse effect on our reputation and business and may result in civil or criminal liability.
● We may be subject to product liability claims when people or property are harmed or damaged by the products that are sold on our platform.
● We have identified material weaknesses in our internal control over financial reporting and have as a result determined that our disclosure controls and procedures were not effective. If we remain unable to remediate identified material weaknesses, or if we have additional material weaknesses in the future, or otherwise fail to implement and maintain effective internal control over financial reporting, we may be unable to accurately report our results of operations, meet our reporting obligations or prevent fraud, and investor confidence in our company and the market price of our ADSs may decline.
● The requirements of being a public company will continue to require significant resources and management attention, which could make it difficult to manage our business.
● We may be classified as a passive foreign investment company (“PFIC”), which could result in adverse U.S. federal income tax consequences to U.S. Holders of ADSs.
Risks Relating to Türkiye
We are subject to risks associated with doing business in an emerging market.
● Our headquarters and other operations and facilities are located in Türkiye and, therefore, our prospects, business, financial condition and results of operations may be adversely affected by political or economic instability in Türkiye.
● As a result of a trend of inflation in Türkiye, the Turkish economy is treated as hyperinflationary, which may adversely affect our business, financial condition, results of operations, cash flows and the value of our ADSs.
● Türkiye’s economy has been facing risks related to its current account deficit, which could have a material adverse effect on our business, financial condition, results of operations and cash flows.
● The effects of earthquakes in Türkiye may adversely affect our prospects, business, financial condition and results of operations.
● We are exposed to the risk of inadvertently violating anti-corruption, anti-money laundering, anti- terrorist financing and economic sanctions laws and regulations and other similar laws and regulations.
● Foreign exchange rate risks could affect the Turkish macroeconomic environment, could affect your investment and could significantly affect our results of operations and financial position in future periods if hedging tools are not available at commercially reasonable terms.
● Türkiye is subject to internal and external unrest and the threat of future terrorist acts, which may adversely affect us.
13
Table of Contents
● Conflict and uncertainty in neighboring and nearby countries, as well as other regions with a geopolitical connection to Türkiye, may have a material adverse effect on the Company’s business, financial condition, results of operations or prospects.
● Risks from events affecting Türkiye’s relationship with the countries in the Middle East.
● Risks from events affecting Türkiye’s relationship with Russia and Ukraine.
● Risks from events affecting Türkiye’s relationship with the EU.
● Risks from events affecting Türkiye’s relationship with the United States.
● Türkiye’s economy has been undergoing a significant transformation and remains subject to ongoing structural and macroeconomic risks.
● Türkiye may continue to be subject to sanctions pursuant to the U.S. Countering America’s Adversaries Through Sanctions Act (“CAATSA”), which may adversely affect our operations, financial condition, or results of operations.
● Internet and e-commerce regulation in Türkiye is recent, has undergone changes since its inception and is subject to further development.
Risks Relating to Ownership of our ADSs
● The Change of Control has resulted, and may continue to result, in changes to our strategy, organizational structure, senior management and other personnel, corporate governance, policies and procedures, business relationships and geopolitical exposure, which could have potential adverse impacts on our business and operations.
● Kaspi.kz controls the majority of our voting rights, and its interests might conflict with or differ from your interests as a shareholder.
● We may lose our foreign private issuer status in the future, which could result in significant additional costs and expenses.
● As a “controlled company” within the meaning of the Nasdaq rules and a foreign private issuer, we qualify for and do rely on exemptions from certain of the Nasdaq corporate governance standards, including the requirement that a majority of our board of directors consist of independent directors. Our reliance on such exemptions may afford less protection to holders of our ADSs.
● An active trading market for our ADSs may not be sustained to provide adequate liquidity, and acquisitions of ADSs by our controlling shareholder, Kaspi.kz, may reduce the liquidity of the market for our ADSs.
● We may need to raise additional funds to finance our future capital needs, which may dilute the value of our outstanding ADSs.
● We may need to carry out certain corporate actions, such as a capital increase, a capital reduction, accounting set-offs or similar actions or a combination thereof to maintain compliance with local capital adequacy rules, some of which may dilute the value of our outstanding ADSs.
● The price of our ADSs might fluctuate significantly, and you could lose all or part of your investment.
● If securities or industry analysts do not publish research or reports or publish unfavorable research about our business, or we fail to meet the expectations of industry analysts, the price of our ADSs and trading volume could decline.
● You may not be able to exercise your right to vote the ordinary shares underlying your ADSs. As an ADS holder, you are not considered a shareholder under Turkish laws.
14
Table of Contents
● Shareholders and ADS holders have in the past been unable to exercise preemptive rights and may again be unable to exercise such rights and, as a result, may experience substantial dilution upon future issuances of ordinary shares.
● ADS holders may not be entitled to a jury trial with respect to claims arising under the deposit agreement, which could result in less favorable outcomes to the plaintiff(s) in any such action.
● It is unlikely that we will declare any dividends on our ordinary shares represented by our ADSs and, therefore, you must rely on price appreciation of our ordinary shares for a return on your investment; also, to the extent that we declare dividends, we will pay those dividends solely in Turkish Lira.
● You may not receive distributions on the ordinary shares represented by our ADSs or any value for them if it is illegal or impractical to make them available to holders of ADSs.
● Dividends paid to holders of the ADSs who are not tax residents of Türkiye will be subject to a 15% withholding tax.
● You may be subject to limitations on the transfer of your ADSs.
● You may experience difficulties in effecting service of legal process, enforcing foreign judgments or bringing original actions in Türkiye based on United States or other foreign laws against us and our management.
● We are a Turkish joint stock company. The rights of our shareholders under Turkish law may be different from the rights of shareholders under the laws of U.S. jurisdictions.
● In the past, we have granted, and in the future we may grant, share-based compensation to our management and employees. Share-based compensation may cause your interest in the Company to be diluted and our employees’ interests to become excessively tied to the trading price of our ADSs.
● We may not maintain our listing on Nasdaq, which could limit investors’ ability to make transactions in our ADSs and subject us to additional trading restrictions.
Risks Relating to Our Business and Industry
We have incurred significant losses in the past and are likely to continue to incur losses as we continue to invest in order to grow, and we may not achieve operational profitability going forward.
In 2025, we incurred a net loss of TRY 5,699.2 million compared to a net loss of TRY 2,100.7 million and net income of TRY 142.8 million for the years ended December 31, 2024 and 2023, respectively, as we invested in the expansion of our core businesses and in growing our strategic assets. Our net losses were also significantly impacted by inflation adjustments primarily at the Gross Contribution level as we have implemented IAS 29 inflation accounting since 2022. In 2023, our net income generation was mainly driven by the monetary gains due to the Group’s net monetary position. Since monetary liabilities, mainly consisting of trade payables and payables to merchants, exceeded monetary assets, mainly consisting of cash and cash equivalents during 2023, the difference resulted in a monetary gain position. Our losses increased in 2025 compared to 2024 mainly due to higher credit card commission costs, marketing costs and operational expenses in order to support topline growth. We will need to generate and sustain increased revenue and Gross Contribution levels to outpace growing operating expenses and capital expenditures in future periods to achieve operational profitability, and even if we do, we may not be able to maintain or increase our profitability. We anticipate that we may continue to incur net losses in the near term mainly as a result of a challenging macroeconomic environment that is putting pressure on customers’ purchasing power, and continued capital expenditures, including investments in our core businesses and the expansion of our logistics operations and financial services operations.
15
Table of Contents
We believe that our ability to generate future profits mainly depends on our ability to execute our strategy. See Item 4.B. “Information on the Company—Business Overview—Our Strategy.” This, in turn, depends on our success in improving the customer and merchant experiences through expanded logistics and fulfillment capabilities, developing and improving our platform and offering new products and services that complement our existing offering and preserve and foster further network effects. These efforts may prove more expensive than we anticipate. As a result, any failure to adequately increase our revenue or manage the costs related to our expansion could prevent us from attaining or increasing operational profitability. Additionally, if we introduce new services in connection with our ongoing expansion, including in international markets, this could result in an unexpected increase in costs or divert our senior management’s attention, which could negatively impact our goal of achieving and maintaining operational profitability. As we expand our services to additional customers and merchants in various regions and add new categories of products, our offerings in such markets and categories may be less profitable than those in which we currently operate, which may not offset the costs required to expand into such markets or categories and could impact our ability to achieve or sustain operational profitability.
Furthermore, our profitability remains sensitive to inflation trends and changes in monetary policy. The compound effects of an increasingly orthodox monetary policy from the Turkish government in response to inflation and other factors have curtailed and may continue to curtail consumer demand, which has had and is expected to continue to have an adverse effect on our order growth. This may ultimately result in negative real GMV growth. An inability to manage or reduce costs during periods when we experience a slowdown or reversal in growth would put additional pressure on our ability to achieve or sustain profitability.
As a result of the preceding factors, we may not be able to achieve, maintain or increase operational profitability in the near term or at all.
Our expansion into new products, services, technologies, geographies and markets subjects us to additional risks and we may not be able to manage our growth and expansion efficiently or effectively scale and adapt our existing infrastructure.
Our growth strategy depends, in part, on our expansion into new product or service offerings, such as our strategic assets and complementary businesses (see Item 4.B. “Information on the Company—Business Overview—Strategic Assets” and “—Complementary Businesses”). If we experience significant future growth, we may be required not only to make additional investments in our platform and workforce, but also to expand our fulfillment infrastructure and consumer support or expand our relationships with various partners and other third parties with whom we do business.
Growth of our business places significant demands on our management and key employees. Expansion has increased, and may continue to increase, the complexity of our business and places a significant strain on our management, operations, technical systems, financial resources and internal control over financial reporting functions. Our current and planned personnel, systems, procedures and controls may not be adequate to support and effectively manage our future operations. If our expansion in offerings outpaces our development of fulfillment infrastructure, our performance may be adversely affected, such as our on-time dispatch performance or average time from order to ready-for-dispatch. If we are unable to successfully manage future growth, consumer satisfaction and our reputation may be negatively and materially affected.
Our re-investments in the Company’s growth and certain Company initiatives may fail, which could harm us financially. For example, in 2024, we took the strategic decision to end our Hepsiburada Market initiative, we made the strategic decisions to discontinue HepsiGlobal’s pilot-phase operations in Ukraine and our Hepsiburada Smart Store project, and we made the commercial decision to put our services operated under Hepsiburada Seyahat on hold pending a further strategic review. In 2025, we decided to discontinue the inbound operations of HepsiGlobal due to regulatory changes and we pivoted our Hepsipay efforts from off-platform to on-platform developments to foster increased growth in our merchant business. While the contribution of discontinued projects had not been material before they were discontinued, future similar discontinuations or strategic re-directions may cause inefficiencies and could have a material adverse effect on our` results of operations and reputation.
16
Table of Contents
Any development of our services, such as any expansion of logistics solutions, our payment and lending solutions, or any expansion of our operations to additional countries, or any further expansion of the outbound operations of HepsiGlobal, through which we enable Turkish merchants to make cross-border sales in certain countries, may result in increased or new exposure to regulatory scrutiny and compliance requirements. See “—Legal and Regulatory Risks—We are subject to extensive laws and government regulations across our business, and changes to these laws or any actual or perceived failure by us to comply with such laws and regulations could materially and adversely affect our business, financial condition, results of operations or cash flows” and “—Risks Relating to Türkiye—Risks from events affecting Türkiye’s relationship with the EU.” Furthermore, we may not be able to realize our expansion plans or the timeframe and the costs for achieving our plans may be different from those currently anticipated. For example, in 2025 our expenses increased due to higher expected credit loss provisions relating to our consumer finance operations, which we are in the early stages of building. Additionally, our ability to realize our expansion plans may be adversely affected by a number of factors that are not within our control, including, with respect to any international projects, geopolitical tensions.
In the future it is possible that other aspects of our strategy will be modified by our controlling shareholder, Kaspi.kz, to prioritize alternative growth opportunities, synergies, operational efficiencies or cost-optimization measures. Any such modifications could result in temporary inefficiencies or costs that could have an adverse effect on our business, financial condition, results of operations and cash flows if we are unable to manage our growth effectively. See “—Risks Relating to Ownership of our ADSs—The Change of Control has resulted and may continue to result in changes to our strategy, organizational structure, senior management and other personnel, corporate governance, policies and procedures, business relationships and geopolitical exposure, which may adversely affect our business, financial condition, results of operations or cash flows.”
We may fail to maintain or improve our technology infrastructure, or adopt and apply technological advances, including, but not limited to, generative AI, which could materially and adversely affect our business, financial condition, results of operations and cash flows, and the use of new technologies may expose us to increased risks.
Our success depends, in part, on our ability to continue to innovate and provide a platform for products and services that is attractive to existing or new customers, and in turn attracts merchants and suppliers to our customer base. We are frequently upgrading and expanding our technology to provide improved performance, increased scale and better integration among our core businesses and complementary businesses. See Item 4.B. “Information on the Company—Business Overview—Strategic Assets” and “—Complementary Businesses.” For example, certain of our business departments are developing projects in areas such as intelligent payment solutions, credit and risk assessment and machine learning- and AI-powered functionalities, including credit scoring and fraud detection solutions, search engine and personalized recommendation solutions, marketplace pricing solutions, strategic decision support for management, operational efficiency and logistics support and innovative applications to foster the development of new technologies. Additionally, we may use intelligence solutions to inform our Direct Sales pricing, which in the future could be informed in real time by machine learning algorithms. Adopting new technologies (including, but not limited to, technologies based on generative AI and machine learning), upgrading our website and mobile app infrastructure and maintaining and improving our technology infrastructure have required and will continue to require significant investments of time and resources, including adding new hardware, updating software, training new engineering personnel and integrating third-party models. Given the swift advancement in AI technologies, we may not be able to develop and integrate AI-based solutions that effectively utilize the latest advancements.
17
Table of Contents
Adverse consequences for the failure to keep up with, and effectively integrate, the latest technologies may include unanticipated system disruptions, security breaches, computer virus attacks, slower response times, impaired quality of experiences for our users and delays in reporting accurate operating and financial information. Any sensitive information (including confidential, competitive, proprietary, or personal data) that we input into a third-party AI platform could be leaked or disclosed to others, including if sensitive information is used to train the third parties’ AI model, which could subject us to legal or regulatory liability and reputational harm and our business, financial condition, and results of operations, as well as our reputation, could be materially and adversely affected. New innovations based on AI in particular may expose us to additional risks in light of the evolving nature of AI technologies. If they are not adequately designed, AI tools may generate inaccurate or biased content, which could subject us to legal or regulatory liability. AI-powered or automated credit analyses, if they are, or are perceived to be, based on flawed data or processes, could give rise to negative consumer perceptions and have an adverse effect on our reputation. Many of the software and interfaces we use are internally developed and proprietary technology. If we experience problems with the functionality and effectiveness of our software or platforms, or are unable to maintain and constantly improve our technology infrastructure to handle our business needs and ensure a consistent and acceptable level of service for our customers and merchants, our business, financial condition, and results of operations, as well as our reputation, could be materially and adversely affected. See “—A cybersecurity incident impacting our systems or the systems of our service providers, including undetected software errors and hacking, may cause material delays or interruptions in our information systems and may reduce the use of our services and damage our brand reputation, which may hinder our ability to conduct our business effectively or result in lost revenues or other costs, including in connection with increasing compliance requirements” and “—Unauthorized disclosure of sensitive or confidential customer information or our failure, or the perception by our users that we failed, to comply with privacy laws or properly address privacy concerns could harm our business and reputation with customers, merchants and suppliers.”
If we fail to maintain and enhance our brand or network effects from our established Marketplace, our business, results of operations and financial condition may be materially and adversely affected.
We believe that our “Hepsiburada” brand is fundamentally important to the success of our business and that our brand, as well as the interaction between our customer and merchant value propositions, create significant network effects. Failure to maintain and enhance our brand or the network effects that have contributed to our past growth may materially and adversely affect our business, financial condition, results of operations and cash flows.
We invest in brand building, marketing and expanding our offering of value-added services with the aim of attracting new, and retaining existing, customers and merchants and increasing their level of engagement. From this, we hope to benefit from network effects whereby our larger consumer base attracts more merchants and our broader spectrum of products and services offered by merchants attracts more customers. However, our brand development or the benefits to our customer and merchant value propositions may not achieve the promotional benefits or network effects that we expect. Benefits may not outpace expenses. For example, the value of our brand awareness may not outpace marketing and brand building expenses. In addition, our existing competitors or potentially new entrants may increase the intensity of their marketing campaigns or value-added services, which may force us to increase our spending to maintain our brand awareness and competitive advantages.
The extent to which we are able to maintain or strengthen these network effects depends on our ability to execute a number of challenging tasks. See “—If we fail to retain current customers and merchants or grow or maintain the level of their engagement, our business, financial condition, prospects and results of operations could be materially and adversely affected.” Any failure to meet such challenges may lead to an increased risk of disruptions to our customer base or merchant base and our customer and merchant value propositions, which could adversely affect our profitability, and could have a material adverse effect on our business, financial condition, results of operations and cash flows. In addition, any changes we make to enhance and improve our platform to meet the needs and interests of certain users or merchants or other third parties may have a negative impact upon others. If we fail to balance the interests of all users and merchants, users may stop visiting our website and using our mobile app and customers may conduct fewer transactions or use alternative e-commerce services, any of which could have a material adverse effect on our business, financial condition, results of operations and cash flows.
18
Table of Contents
In the event that our brand is subject to persistent and material negative publicity, complaints from customers, merchants, suppliers or business partners, or exposure as a result of our own actions or as a result of events outside of our control, such as our inability to attract users and merchants, to protect private information of our users and merchants against security breaches, any undetected errors, defects or bugs in software underlying our products and services, or disruption in our IT systems or defamation campaigns in social media against us or e-commerce in general, we may have difficulty in retaining our existing users or merchants or attracting new users or merchants. If such negative publicity about us arises or if users or consumers otherwise perceive that content on our online platform is no longer reliable, our reputation, the value of our brand, our user traffic and number of merchants on our platform could decline. If our brand is harmed or we are forced to increase our marketing expenses to gain back customer and/or merchant trust, our business, prospects, financial condition and results of operations could be materially and adversely affected. See “—Our headquarters and other operations and facilities are located in Türkiye and, therefore, our prospects, business, financial condition and results of operations may be adversely affected by political or economic instability in Türkiye.”
To maintain good customer relations, we need prompt and accurate customer service to resolve irregularities and disputes. Effective customer service requires significant personnel expense, investment in developing programs and technology infrastructure to help customer service representatives carry out their functions as well as a dedicated budget that can be used to resolve disputes and restore customer satisfaction. These expenses, if not managed properly, could significantly impact our profitability. Failure to manage or train our customer service representatives properly could compromise our ability to handle customer complaints effectively. If we do not handle customer complaints effectively, our reputation may suffer and we may lose our customers’ confidence.
In addition, from time to time in the past we have executed, and may in future execute, advertisement contracts with celebrities and social media influencers to promote our sites and brands in marketing campaigns. Harm to those celebrities’ or social media influencers’ reputations, even if not associated with our sites and brands, could also harm our brand image and result in a material decrease in our revenues, which could have a material adverse effect on our business, results of operations, financial condition and cash flows.
We operate in competitive markets, and in the future we may not be able to compete effectively.
The markets for our products and services are competitive and rapidly evolving. The successful execution of our strategy depends on our ability to nurture the loyalty of our customer base, capitalize on our differentiators and offer our payment services, lending solutions and last-mile delivery services to third parties.
We have many competitors in our e-commerce business. We compete with other e-commerce companies, including online third-party marketplaces and online hybrid marketplaces that, like us, combine a third-party marketplace with their own first-party sales. We also face competition from offline retailers and hard-discounters, including traditional brick-and-mortar retailers and hard-discounters with omni-channel capabilities. Some of those omni-channel retailers have advanced their online sales capabilities over the past few years to meet the increased demand for online retail. We compete with these current and potential competitors for customers, merchants and suppliers. From time to time, our customers may decide not to continue purchasing products on our platform for various reasons, including competition. Our merchants may also decide to switch to our competitors’ services. Some of our existing or potential competitors may have greater resources including funding, more customers, and/or greater brand recognition to develop stronger capabilities and expertise in management, technology, finance, product development, sales, marketing, logistics and other areas. Further, the internet facilitates competitive entry and comparison shopping, which enhances the ability of new, smaller or lesser-known businesses, including businesses from outside of Türkiye, to compete against us. We also face e-commerce competition in markets outside of Türkiye that we serve via HepsiGlobal.
In addition, we face competition across other sectors in which we operate. We face intense competition with several well-funded players investing heavily in growth across the parts of the country and in the verticals we serve our customers. In the last-mile delivery services market, in which Hepsijet operates, small, emerging delivery companies, albeit few in number, are challenging us, particularly in large cities, by offering their delivery services at relatively lower delivery fees. If competition continues to intensify, we may fail to grow our third-party delivery businesses. In the fulfillment as a service market, in which HepsiLojistik operates, other players have invested in such services. Additionally, competition has intensified in the financial services industry, in which Hepsipay operates, spurred by significant investment into the fintech space and regulations with respect to, among others, digital banking, open banking, banking-as-a-service and Know Your Customer (“KYC”) requirements in Türkiye, which could hinder our growth in the financial technologies market in Türkiye. A number of retailers, marketplaces and other companies have also obtained and others may in the future obtain e-money, digital banking or consumer finance licenses and extend their operations off-platform, challenging our plans to extend our off-platform partnerships. A more competitive environment may adversely affect Hepsipay’s growth, which could result in a delay or a failure to reach our goals in the financial services sector.
19
Table of Contents
Most recently, the rapid development of new and enhanced technologies, including those based on artificial intelligence and machine learning, continue to increase our competition. Although we have invested and will continue to expend financial resources to strengthen and improve our information technology systems and online platform, some of our current and potential competitors have greater resources and more specialized personnel to support technological advances and to more rapidly enhance their capabilities in this area. Any failure to adapt to technological advances in a timely manner and to integrate our offerings through our online platform and apps, could decrease the attractiveness of our platform and apps and could have a material adverse effect on our business, financial condition, results of operations, cash flows and prospects.
As a result of these various types of current and potential competitors, we may not be able to maintain our level of traffic on our online platform, we may fail to retain or may lose our current market position, we may fail to continue to retain our existing customers and merchants, and we may be required to offer additional customer discounts, or maintain lower prices, which could materially and adversely affect our business, financial condition, results of operations and cash flows.
Failed deliveries, excessive returns and other logistics issues may adversely affect our business, financial condition, results of operations and cash flows.
We offer customers a selection of delivery options, including delivery by courier or collection from our offline network of pick-up and drop-off (“PUDO”) points. If a delivery fails to reach the customer, we may continue bearing the inventory costs or be required to engage with the merchant for the return of the undelivered product. Even if the product is successfully delivered to the customer and delivery is verified, we and our merchants are required either by local regulations or by our operating standards, in most cases, to allow customers to return undamaged products within a certain period of time after delivery, depending on the product. We also face the risk that inventory might be misappropriated or packages mishandled, and we may struggle to verify delivery if the packages are delivered without verification of the customer’s identity via customer signature, confirmation code sent to customer’s mobile phone or otherwise. When products are delivered without verification, we ask for, but may not always receive, reimbursement from the courier company for the cost of delivery of a duplicate product to the customer or a refund of the purchase price.
A significant increase in failed deliveries, excessive or mistaken returns or other logistics issues may force us to allocate additional resources to mitigating these issues and may adversely affect our business, prospects, financial condition, results of operations and cash flows.
If we fail to retain current customers and merchants or grow or maintain the level of their engagement, our business, financial condition, prospects and results of operations could be materially and adversely affected.
The size and engagement of our Active Customer base, including Order Frequency and customer loyalty, are critical to our success. A significant component of our value proposition to merchants is their ability to access our over 85 million members. Our business and financial performance have been and will continue to be significantly determined by our success in engaging, retaining, and adding Active Customers. We continue to focus on increasing engagement, whether through our paid-subscription loyalty program, innovation, providing new or improved goods or services, marketing efforts or other means. Nonetheless, our Active Customer base and/or engagement levels, including through our paid-subscription loyalty program, have fluctuated in the past and may in the future fail to grow at satisfactory rates, or at all, or may decline. As of December 31, 2025, 2024 and 2023, our Active Customer base was 11.8 million, 11.8 million and 11.6 million, respectively. Our user base growth and engagement could be adversely affected if, among other things:
● we are unable to maintain the quality of our existing products and services;
● we are unable to sustain the customer experience due to budgetary concerns or regulatory changes;
● we are unsuccessful in innovating or introducing new products and services;
● we fail to adapt to changes in user preferences, market trends or advancements in technology;
● we fail to compete with the current competitors or the potential new entrants in the market;
● technical or other problems prevent us from delivering our products or services in a timely and reliable manner or otherwise affect the user experience;
20
Table of Contents
● there are user concerns related to privacy, safety, security or reputational factors;
● there are adverse changes to our platform that are mandated by, or that we elect to make in response to, legislation, regulation, or litigation, including settlements or consent decrees;
● we fail to maintain the brand image of our platform or our reputation is damaged;
● we fail to maintain the competitive advantage of our platform with respect to pricing or are unable to respond effectively to changes in consumer sentiment or purchasing power;
● there are unexpected temporary or permanent changes to the demographic trends, customer sentiment, competitive landscape or economic development of the markets in which we operate; or
● there is political instability in the markets that we operate in.
Our efforts to avoid or address any of these events could require us to make substantial expenditures to modify or adapt our services or platform. Similarly, our number of Active Merchants has fluctuated in the past and may in the future fail to grow at satisfactory rates, or at all, or may decline, for reasons similar to those described above or if merchants opt to sell only via their own website because they are disincentivized by regulatory developments (such as the recent withholding tax collection rule) to sell via a marketplace. As of December 31, 2025, 2024 and 2023, we had 102.0 thousand, 100.2 thousand and 101.5 thousand Active Merchants, respectively. If we fail to engage with or experience a material decrease in the size of our Active Customers or Active Merchants base (in particular with respect to our key merchant accounts), or if customers, merchants or suppliers reduce their engagement with our platform, our business, financial condition, results of operations and prospects could be materially and adversely affected.
In 2025, we made changes to the methodology through which we calculate certain key operational and financial metrics, including the definition of Active Customer. For comparability purposes, the key operational and financial metrics for 2024 and 2023 have been restated in accordance with the new methodology. See Item 5. “Operating and Financial Review and Prospects—Key Indicators of Operating and Financial Performance and Non-IFRS Measures.” See also “—Our operating metrics and competitive information, both internally calculated and provided by third parties and included in this annual report, have changed and may in the future change from time to time, and may be calculated differently from the metrics or competitive information published by our competitors or other third parties in our industry and any perceived inaccuracies or inadequate cross-company comparisons may harm our reputation.”
We may need to raise additional funds to finance our future capital needs, including investing in growth and technology, which may prevent us from growing our business.
Our strategy and technological infrastructure require continuous investment. We may need to raise additional funds to finance our existing and future capital needs, including developing new services and technologies and ongoing operating expenses, such as our efforts to launch and develop new payment and lending solutions, and expansion of our existing services. Raising additional funds through capital increases or financing arrangements may not be possible at the required amounts or on sufficiently advantageous terms or as a result of macroeconomic conditions. Any debt financing would increase our level of indebtedness and could negatively and materially affect our liquidity and restrict our operations, including increasing our vulnerability to general economic and industry conditions, limit our ability to plan and react to changes in our business and industry and place us at a disadvantage compared to competitors that have less indebtedness. We also can provide no assurance that the funds we raise will be sufficient to finance our indebtedness.
21
Table of Contents
Historically, we primarily have been financed by equity investments from our shareholders, including a capital increase conducted in 2025, the proceeds of our initial public offering in 2021 and cash flows from operations. We also have entered into financing arrangements with several major Turkish banks. In 2024, we began using asset-backet securities (“ABS”) as a source of funds for our operations to partially fund our Buy-Now-Pay-Later (“BNPL”) business externally. Although the ABS program was discontinued in 2025, we may use ABS again in the future. Additionally, in 2024 Hepsi Finansman began issuing bonds to grow its consumer finance business. See Item 5.B. “Operating and Financial Review and Prospects—Liquidity and Capital Resources—Current Sources of Liquidity and Capital Resources.” Any breach of our financing arrangements or the inability to service our debt through internally generated cash flow or other sources of liquidity would lead to default, which could have a material adverse effect on our business, results of operations, financial condition and cash flows. Additionally, while diversification of our funding mix can support our involvement in consumer finance, it brings additional exposure to capital markets risks, including potential limitations in the availability of liquidity in fixed income markets when needed by our businesses, volatility in funding costs, potential mismatches in funding duration and lending durations and risks around securing renewal/extension of permits for issuing capital markets instruments.
We have also invested, and may continue to invest from time to time, our available cash in fixed-income investments other than term deposits. These can be direct investments in Eurobonds issued by the Turkish government or Turkish companies, or in mutual funds investments investing in such assets. This exposes us to risks associated with the Turkish government or associated issuers, as well as interest rate fluctuations, hence we can provide no assurance that such investments will yield expected returns, which could have an adverse effect on our financial condition.
We may in the future partially finance our projects and the continuation of our operations by way of foreign currency-denominated loans, which may subject us to some regulatory uncertainty. Pursuant to Decree No. 32 on the Protection of the Value of the Turkish Currency and the related foreign exchange regulations, access to foreign currency-denominated loans by residents of Türkiye is subject to certain conditions and limitations. In particular, the availability of foreign currency loans depends on factors such as the borrower’s foreign currency income, its existing foreign currency loan balance and compliance with applicable thresholds and documentation requirements in effect at the relevant time. The scope and application of these restrictions may be expanded, tightened or otherwise amended from time to time through regulations, communiqués or administrative practices issued by the Ministry of Treasury and Finance, The Central Bank of the Republic of Türkiye and other competent authorities. As a result, even where we may seek to obtain foreign currency-denominated financing, we may not be able to access such financing at all times or on acceptable terms or may be required to refinance or convert such borrowings into Turkish lira in the event of non-compliance with applicable rules. Any such limitations or changes could adversely affect our liquidity, financing flexibility, cost of funding and financial condition.
In addition, following the Constitutional Court of Türkiye’s decision dated October 15, 2025 annulling Article 1 of the Law on the Protection of the Value of Turkish Currency, which constituted the statutory basis for regulations governing foreign exchange and capital movements, and considering that the Constitutional Court postponed the effective date of the annulment until July 15, 2026, Decree No. 32 on the Protection of the Value of the Turkish Currency may be left without a clear legal foundation if no new legislative framework is enacted before that date. Until new legislative arrangements are enacted, this may result in regulatory uncertainty and inconsistent interpretation or application of the rules relating to capital movements and foreign exchange transactions in Türkiye. Such uncertainty could adversely affect compliance processes and investment planning.
Changes in our share ownership or other types of default could result in our inability to draw loans or cause acceleration or events of default under our indebtedness.
There are various standard default provisions, including notably clauses relating to the control or ownership of our issued ordinary shares, in the terms and conditions of substantially all of our credit facility arrangements with Turkish banks and substantially all of our finance lease agreements with Turkish financial lease companies. Under the terms of such credit facility arrangements and finance lease agreements, the exact terms of which vary, various actions, including a transfer of our shares or change in our issued share capital structure, may provide our lenders with the right to accelerate the repayment of outstanding debt facilities and may result in events of default that provide our lenders the right to terminate our arrangements. The total amount available under our credit facility agreements was TRY 596.6 million and TRY 2,202.5 million as of December 31, 2025 and December 31, 2024, respectively, and the total liability under our finance lease agreements was TRY 328.5 million and TRY 10.8 million as of December 31, 2025 and December 31, 2024, respectively (see Item 5.B. “Operating and Financial Review and Prospects—Liquidity and Capital Resources—Current Sources of Liquidity and Capital Resources”).
In the past such banks and other counterparties to our financial leases have not exercised their acceleration or termination rights under change in control clauses, including in connection with the Change of Control. However, we cannot guarantee that such counterparties will continue with this practice and will not take any adverse actions in connection with any change of control that may occur in the future.
22
Table of Contents
Additionally, although our counterparties have not taken any adverse actions in connection with the Change of Control, we cannot exclude that our capacity to raise additional funding and our relationships with the Turkish bank system may progressively deteriorate in the future as a result of new ownership. The relationships we have built with Turkish banks could be adversely affected if such banks perceive us as a competitor in light of the strength of the financial services operations of our controlling shareholder in its home market or as a result of our controlling shareholder’s potential acquisition of Rabobank Group’s Turkish subsidiary, subject to regulatory and contractual approvals, as announced by Kaspi.kz in March 2025. If this occurs, Turkish banks may be less likely to cooperate with us in terms of our credit card costs and credit lines. If one or more banks providing such credit lines were to terminate their agreements, our access to debt financing may be limited, which would have a material impact on our ability to fund our business.
A significant disruption in internet access, telecommunications networks or our IT platform may cause slow response times or otherwise impair our customers’ experience, which may in turn reduce traffic to our mobile apps and websites and significantly harm our business, financial condition and results of operations.
Our e-commerce business is critically dependent on the performance and reliability of Türkiye’s internet infrastructure, accessibility of bandwidth and servers to our service providers’ networks and the continuing performance, reliability and availability of our platform.
We are heavily reliant on Türkiye’s internet infrastructure to operate our business. As our data centers and all of our backup centers, along with our headquarters, are located on the European and Asian sides of the city of Istanbul, our operations may also be negatively impacted by disruptions to the power grid, natural disasters, such as fires, floods, earthquakes, telecommunication failures, sabotage, vandalism, terrorist attacks, civil unrest, conflicts, extreme weather or other events affecting the region. Similarly, if there were any system outages due to any internet delays, disruptions, natural disasters, restrictive actions from local authorities or any other issues with the infrastructure in Türkiye more generally, this would have a material adverse impact on our business and results of operations depending on the length and severity of the issue.
For example, in early February 2023, the southeastern and southern regions of Türkiye were hit by two devastating earthquakes registering 7.7 and 7.6 in magnitude and numerous aftershocks that affected primarily 11 provinces, which caused significant disruptions in the telecommunications networks and internet access in the affected regions. The earthquakes resulted in a material temporary decline in overall customer demand on our platform and in the number of orders received, particularly during the first week of the disaster compared to the prior week as well as the same week of the prior year. We believe that the decline was in part caused by the lack of, or very poor, internet connection in the affected regions. In this instance, traffic to our platform recovered to pre-earthquake levels by the second quarter of 2023. If the period of destabilization had been prolonged, or if the extent or the magnitude of the earthquakes had been more detrimental, the duration of traffic loss (and hence order loss) would have materially impacted our financial performance. See “—Risks Relating to Türkiye—The effects of earthquakes in Türkiye may adversely affect our prospects, business, financial condition and results of operations.” Further, government authorities may manipulate internet bandwidth to counter civil unrest, as was done by police in Istanbul in September 2025. This type of intervention, if prolonged, could also have a material adverse impact on our business and financial performance. See “—Risks Relating to Türkiye—Our headquarters and other operations and facilities are located in Türkiye and, therefore, our prospects, business, financial condition and results of operations may be adversely affected by political or economic instability in Türkiye.”
We may also experience slow response times or system failures due to a failure of our information storage, retrieval, processing and management capabilities, human errors or capacity constraints. Slow response times or system failures may make our platform less attractive to merchants or customers. If we experience technical problems in delivering our services over the internet, we could experience reduced demand for our services and lower revenue. Also, when too many customers access our sites within a short period of time due to increased demand, such as during our seasonal sales, or any other reason, we have in the past experienced system interruptions that make our platform unavailable or prevent us from efficiently fulfilling orders, which reduces the volume of goods we sell and the attractiveness of our products and services.
We cannot assure you that significant disruptions in internet access, interruption of our telecommunications networks or failures in our IT platform will not occur again in the future and while we have backup systems and contingency plans for certain aspects of our operations and business processes, our planning may not account for all possible scenarios.
Significant disruptions in internet access or in the internet generally could significantly harm our business, prospects, financial condition and results of operations.
23
Table of Contents
We may experience significant fluctuations in our results of operations and growth rate.
We have grown in recent years, and we intend to continue to expand the scope of our services within Türkiye and the geographic reach of our business in nearby countries. Revenue growth may slow down, decline or reverse for any number of reasons, including our inability to attract or retain merchants and customers, decreased customer order frequency and spending, increased competition, heightened pressure on purchasing power, a slow-down in consumption particularly in discretionary goods, slowing overall growth of the e-commerce market, the emergence of alternative business models, changes in government policies or regulations and general macroeconomic conditions. See “—Risks Relating to Türkiye—Türkiye’s economy has been undergoing a significant transformation and remains subject to ongoing structural and macroeconomic risks.” We may also lose customers and merchants for other reasons, such as a failure to deliver a satisfactory customer or transaction experience or high-quality services at a level that our customers expect. If we are unable to properly and prudently manage our operations as they continue to grow, or if the quality of our services deteriorates due to mismanagement, our brand name and reputation could be significantly harmed, and our business, prospects, financial condition and results of operations could be materially and adversely affected.
In addition, a disproportionate amount of sales on our platform has historically taken place during our fourth quarter and we expect this trend to continue in 2026. The limitations introduced by amendments to the E-Commerce Law in 2022 (as defined under Item 4.B. “Information on the Company—Business Overview—Regulatory Overview”) providing that capped annual marketing expenditures and customer discounts must be equally distributed among the four fiscal quarters do not apply to the Company, as we were below the applicable statutory threshold of marketing expenditures in 2023, 2024 and 2025 and expect to remain so in 2026 (see Item 4.B. “Information on the Company—Business Overview—Regulatory Overview”). However, they could apply in the future, which could adversely affect our ability to align our marketing efforts with our business’s seasonality. Additionally, as a result of peak seasonal sales, as of December 31 of each year, our cash and cash equivalents balances typically reach an elevated level (other than as a result of cash flows provided by or used in investing and financing activities). As of December 31 each year, this operating cycle typically results in a corresponding increase in accounts payable, combined with a decrease in inventories. Our accounts payable balance generally declines during the first month of each year, resulting in a corresponding decline in our cash and cash equivalents balances. Additionally, we typically experience decreased frequency and traffic on our platform during the summer vacation months, which may or may not continue in 2026. Our results of operations and cash flows may fluctuate significantly as a result of a variety of factors, including those described above. Additionally, we factor monthly inflation rates into our financial reporting under IAS 29. The distribution of our sales throughout the months and the level of inflation during each month have a material impact on our revenue growth calculated as per accounting standard IAS 29. See “—Risks Relating to Türkiye—As a result of a trend of inflation in Türkiye, the Turkish economy is treated as hyperinflationary, which may adversely affect our business, profitability, results of operations and the value of our ADSs.” As a result, historical period-to-period comparisons of our results of operations and cash flows are not necessarily indicative of future period-to-period results of operations or cash flows. You should not rely on the results of a single quarterly period as an indication of our annual results of operations, cash flows or future performance.
Any occurrence of natural disasters, earthquakes, epidemics, pandemics, civil unrest and wars or other outbreaks, or other catastrophic events could also materially and adversely affect our business, financial condition, results of operations or cash flows.
Epidemics and pandemics or other health outbreaks may materially affect our business, including with respect to customer behavior, product sourcing and delivery considerations. For example, the COVID-19 pandemic and the measures taken to limit its spread during 2020 and 2021 impacted consumer behavior, including e-commerce shopping trends. During the early months of the COVID-19 pandemic, increased numbers of consumers in the Turkish market shifted to e-commerce as a result of social distancing and other government restrictions, which resulted in growing demand for our products and services. With the lifting of Türkiye’s lock down measures in July 2021, we observed a slowdown in online consumer activity, which had a negative impact on our operational and financial performance and prospects, particularly in 2021.
Other crises or conflicts, such as the Russia-Ukraine conflict, the conflicts in the Middle East, the hyperinflationary environment in Türkiye and the potential for any sudden and significant changes in the value of the Turkish Lira, or material volatility in oil prices, may generate pressure on the supply to our Direct Sales operations and to our merchants. See “— Risks Relating to Türkiye—Risks from events affecting Türkiye’s relationship with Russia and Ukraine,” “—Risks Relating to Türkiye—Risks from events affecting Türkiye’s relationship with the countries in the Middle East,” “—Risks Relating to Türkiye—As a result of a trend of inflation in Türkiye, the Turkish economy is treated as hyperinflationary, which may adversely affect our business, profitability, results of operations and the value of our ADSs” and “—Risks Relating to Türkiye—Foreign exchange rate risks could affect the Turkish macroeconomic environment, could affect your investment and could significantly affect our results of operations and financial position in future periods if hedging tools are not available at commercially reasonable terms.”
24
Table of Contents
The above developments have materially affected, and may continue to materially and negatively affect, certain of our business activities and results.
Similarly, our business, financial condition and results of operations could be adversely affected by severe weather conditions, natural disasters, geopolitical events, civil unrest, wars, terrorist attacks, the occurrence or re-occurrence of other outbreaks of widespread health epidemics or pandemics, and other similar catastrophic events. The occurrence of a disaster or similar event could materially disrupt our business and operations, adversely affect our markets or the economy generally, or adversely affect our employees, third-party service providers, business partners or a significant portion of our users. Examples that have occurred in recent years include the 2023 earthquakes in southeastern and southern Türkiye and the 2025 civil unrest in Istanbul. These types of events, especially when they affect key areas of our operations, could cause us to close some or all of our operating facilities temporarily or disrupt our logistics and last-mile delivery capabilities, which would severely disrupt our operations and have a material adverse effect on our business, financial condition, results of operations and cash flows. In addition, our sales could be materially reduced to the extent that a natural disaster, health epidemic or other major event harms the economy of the countries where we operate. Our operations could also be severely disrupted if our customers, merchants or other participants were affected by such natural disasters, health epidemics or other major events. See “—Risks Relating to Türkiye—The effects of earthquakes in Türkiye may adversely affect our prospects, business, financial condition and results of operations,” “—Risks Relating to Türkiye—Our headquarters and other operations and facilities are located in Türkiye and, therefore, our prospects, business, financial condition and results of operations may be adversely affected by political or economic instability in Türkiye” and “—Risks Relating to Our Business and Industry—A significant disruption in internet access, telecommunications networks or our IT platform may cause slow response times or otherwise impair our customers’ experience, which may in turn reduce traffic to our mobile apps and websites and significantly harm our business, financial condition and results of operations.”
A cybersecurity incident impacting our systems or the systems of our service providers, including undetected software errors and hacking, may cause material delays or interruptions in our information systems and may reduce the use of our services and damage our brand reputation, which may hinder our ability to conduct our business effectively or result in lost revenues or other costs, including in connection with increasing compliance requirements.
Our online systems, including our websites, mobile apps and other software applications, products and information systems, could contain undetected errors, or “bugs,” that could adversely affect their performance. While we regularly update and enhance our websites and information systems and introduce new versions of our mobile apps, the occurrence of errors in any such updates or enhancements may cause disruptions in the provision of our services and may, as a result, cause us to lose market share, and our reputation and brand, business, prospects, financial condition and results of operations could be materially and adversely affected.
In addition, computer viruses and cybersecurity incidents have in the past and may in the future cause delays or other service interruptions on our information systems. We have in the past and may in the future also be subject to cybersecurity threats or attempts by malicious actors who seek to gain unauthorized access to our information or systems or to cause intentional malfunctions, loss or corruption of data or leakages of our customers’ and merchants’ sensitive or personal data, or other cybersecurity incidents.
For example, during February 2024, the Company experienced a cybersecurity incident. Based on our investigation, we believe that a threat actor utilized compromised merchant login details to access certain merchant accounts on our merchant portal and then download certain merchant and customer data through those merchant accounts. We believe that approximately 673 merchant accounts were breached (representing less than 0.7% of our Active Merchants as of December 31, 2023) and fraudulent listings or transactions were made on 107 merchant accounts. We believe that customer data was downloaded from merchant accounts for approximately 7,200 customers and suspicious orders were created for approximately 1,200 customers (representing approximately 0.06% and 0.01%, respectively, of our Active Customers as of December 31, 2023). Once the Company became aware of the incident, the threat actor was promptly excluded from the merchant portal and a series of measures were implemented, designed to reinforce security protocols, prevent further unauthorized access and remediate the incident, including by suspending and resetting passwords for compromised merchant accounts, cancelling suspicious transactions and reimbursing customers who were impacted. We incurred immaterial expenses in connection with the investigation and remediation of this incident and to reimburse customers for purchases made based on manipulated listings.
25
Table of Contents
In connection with the incident, to fulfill our obligations as a data controller under the Turkish Personal Data Protection Law No. 6698 (the “LPPD”), we notified the Personal Data Protection Authority (“PDP Authority”), as well as merchants and customers affected by the data breach. The PDP Authority determined, in a decision that was notified to the Company on September 9, 2024, that the Company had failed to take technical and administrative measures necessary to prevent data breaches. Consequently, the PDP Authority imposed on the Company an administrative fine of TRY 3,250,000, which was paid on February 25, 2026. We submitted objections against the PDP Authority’s decision pursuant to Article 11 of the Administrative Procedural Law requesting the annulment or the amendment of the decision, but our objections were dismissed. On November 20, 2024, we initiated legal proceedings to challenge the fine. The lower court dismissed the case on July 21, 2025. We filed an appeal against this decision on August 12, 2025, within the statutory time limit. Our appeal was denied, and the court of appeals ruled that the decision could not be further appealed to the higher court. Subsequently, we filed an objection and a request for correction of the court of appeal’s decision on the grounds that the right to appeal should remain open. The Regional Administrative Court has since revised its ruling to reflect that the right to further appeal is available. We expect to file an appeal before the Council of State within the applicable statutory period.
We cannot provide any assurance that the various antivirus and computer protection software that we employ in our operations will successfully prevent future cybersecurity incidents (whether through the use of “denial of service” attacks or otherwise) or the transmission of any computer viruses which, if not prevented, could significantly damage our software systems and databases, cause disruptions to our business activities (including to our email, short message service (“SMS”), push and other communications systems), result in cybersecurity breaches or inadvertent disclosure of confidential, sensitive or personal information and hinder access to our platform. Further, the failure of such software to perform as anticipated for any reason could disrupt our business operations. For example, in July 2024, a software update by CrowdStrike Holdings, Inc. (“CrowdStrike”), a cybersecurity technology company, caused widespread crashes of Windows systems into which it was integrated. Our systems were briefly affected by the CrowdStrike software update, during which time customers using our platform encountered issues while ordering items. A temporary solution released by CrowdStrike allowed orders to resume after 260 minutes, and a permanent solution was implemented in August 2024. Additionally, cybersecurity incidents at third parties with which we collaborate and on which we rely for our business operations, such as cargo companies that deliver our products, could have a material adverse effect on our business, prospects, financial condition, results of operations and cash flows.
Additionally, cybersecurity threats are becoming increasingly sophisticated due to emerging technologies, such as AI and other advanced automated tools. The use of new technologies may expose us to increased security risks and may result in significant costs and personnel time to adapt our technology infrastructure and to upgrade and maintain our control systems. Any failure to maintain our information security protocols, timely make upgrades or identify vulnerabilities in software and detect security incidents may adversely impact our business and reputation.
We may incur significant costs to protect our systems and equipment against the threat of, and to repair any damage caused by, computer viruses, hacking or other cybersecurity incidents. These costs, which could be material, could adversely impact our results of operations in the period in which they are incurred and may not meaningfully limit the success of future attempts to breach our information technology systems. Moreover, if a computer virus or other compromise of our systems becomes public, or if we are perceived to have failed to respond to security breaches of our systems or networks, our business, reputation and brand could be materially damaged, resulting in a decrease in the use of our platform, products and services.
The implementation of an overall response plan in the event of a material cybersecurity incident, including compliance with regulatory requirements around timely disclosure thereof, may result in additional costs and require significant management attention, which could have an adverse effect on our business, financial condition, results of operations and cash flows. Any failure to properly respond to cybersecurity incidents or threats could also result in private consumer, business partner, or securities litigation and governmental investigations and proceedings, any of which could result in our exposure to material civil or criminal liability, and may adversely affect our business, financial condition, results of operations and cash flows.
26
Table of Contents
Additionally, compliance costs have further increased following the entry into force and publication in the Official Gazette of the Turkish Cyber Security Law (“CSL”) published in the Official Gazette on March 19, 2025. The CSL primarily regulates (i) the establishment of the Cyber Security Presidency (“CSP”), (ii) the CSP’s duties and authorities and (iii) the legal requirements for public institutions, legal entities, individuals and organizations without legal personality that exist, operate and provide services in cyberspace (“Relevant Institutions”) to comply with cybersecurity regulations. These regulations require the Relevant Institutions, including legal entities, to inform the CSP in the event of any cybersecurity incident. In addition, the CSP is authorized to access and use information, documents, data and records from companies strictly within the scope of its duties under the CSL. This includes utilizing archives and electronic data processing centers belonging to these institutions, as well as collecting, storing, and analyzing the associated log records. The CSL prescribes administrative fines, as well as prison sentences for certain violations, in case of non-compliance with the legislation. Starting from the date the CSL came into effect on March 19, 2025, any failure by us to fully comply with the legislation will result in our exposure to material civil or criminal liability, and may adversely affect our business, financial condition, results of operations and cash flows.
Unauthorized disclosure of sensitive or confidential customer information or our failure, or the perception by our users that we failed, to comply with privacy laws or properly address privacy concerns could harm our business and reputation with customers, merchants and suppliers.
We collect, store, process, transmit and use certain personal information and other user data in our business. A significant risk associated with e-commerce, financial services and communications is the secure transmission of confidential information and personal data over public networks. The perception of privacy concerns, whether or not valid, may adversely affect our business, financial condition, results of operations and cash flows. We must ensure that any processing, collection, use, storage, dissemination, transfer and disposal of data for which we are responsible complies with relevant data protection and privacy laws, including Turkish data protection and privacy laws (along with the decisions, publications and good-practice examples of the relevant authorities, such as the Turkish Personal Data Protection Authority) as well as other data protection and privacy laws, such as the European Union General Data Protection Regulation (“GDPR”) particularly due to the launch and development of cross-border sales through HepsiGlobal.
The protection of our user, employee and company data is critical to us. Currently, a number of our users authorize us to bill their credit card accounts directly. We rely on commercially available systems, software, tools and monitoring to provide encryption, secure processing, transmission and storage of confidential customer information, such as credit card and other personal information. We collected and processed personal data in connection with the services of Hepsiburada Seyahat until its operations were put on hold at the end of March 2024. We continue to collect and process personal data in connection with the services of Hepsijet, Hepsipay and Hepsi Finansman.
Our facilities and systems, and those of our third-party service providers, may be vulnerable to security breaches, acts of vandalism, computer viruses, misplaced or lost data, programming or human errors, or other similar events. Any security breach, or any perceived failure involving the misappropriation, loss or other unauthorized disclosure of confidential information, as well as any failure or perceived failure to comply with laws, policies, legal obligations or industry standards regarding data privacy and protection, whether by us or our merchants, could damage our reputation, expose us to litigation risk, regulatory investigations and liability, subject us to negative publicity, disrupt our operations and harm our business. For example, in February 2024, a threat actor used compromised merchant login details to access an immaterial number of merchant accounts on Hepsiburada’s merchant portal and download certain merchant and customer data (see “—A cybersecurity incident impacting our systems or the systems of our service providers, including undetected software errors and hacking, may cause material delays or interruptions in our information systems and may reduce the use of our services and damage our brand reputation, which may hinder our ability to conduct our business effectively or result in lost revenues or other costs, including in connection with increasing compliance requirements”). We cannot assure you that our security measures will prevent security breaches or that failure to prevent them will not have a material adverse effect on our business, financial condition, results of operations and cash flows. Further, we do not require our vendors to carry cybersecurity insurance to compensate for any losses that may result from any breach of security and our cybersecurity insurance does not cover any breach of security occurring at our vendors. Therefore, our results of operations or financial condition may be materially adversely affected if our existing general liability policies did not cover a security breach.
The development and use of innovative technologies in our business, including those based on machine learning and AI, may also expose us to an increased risk of data breach. See “Risks Relating to Our Business and Industry—We may fail to maintain or improve our technology infrastructure, or adopt and apply technological advances, including but not limited to AI, which could materially and adversely affect our business, results of operations and financial condition, and the use of new technologies may expose us to increased risks.”
27
Table of Contents
Hepsipay is subject to a number of risks that, if they were to occur, could materially and adversely affect our growth in the financial technologies market in Türkiye.
Hepsipay processes a significant amount of payments on our platform, serving as the majority payment service provider, having processed over 90% of all card payments made in connection with orders in December 2025. Hepsipay is subject to a number of risks that, if they were to occur, could materially and adversely affect our growth in the financial technologies market in Türkiye, including, but not limited to:
● increasing competition, including from other established companies, e-money companies, companies engaged in other financial technology services and potential new entrants;
● changes to laws and regulations applicable to Hepsipay that may impact our Hepsipay operations’ feasibility or profitability, including increased KYC requirements or severe restrictions on digital banking, open banking and banking-as-a-service;
● low penetration of Hepsipay to merchants due to intense competition, cumbersome integration process and/or monetization model;
● breach of customers’ privacy and concerns over the use and security of information collected from customers and any related negative publicity or liability relating thereto;
● service outages, system failures or failure to effectively scale the system to handle large and growing transaction volumes;
● dissatisfaction with the check-out experience at third-party retailers leading to the loss of third-party Hepsipay clients;
● increasing costs to Hepsipay, including fees charged by banks to process transactions through Hepsipay, which would also increase our related costs;
● negative news about and social media coverage on Hepsipay, its business, its service offerings, or matters relating to Hepsipay’s data security and privacy; and
● failure to manage customer funds accurately or loss of customer funds, whether due to employee fraud, security breaches, technical errors or otherwise.
We are subject to credit risk of our borrowers in relation to our Buy-Now-Pay-Later solution and consumer finance loan offering.
We offer a BNPL solution, providing customers with the opportunity to complete their purchase and submit payment a month later or in up to 12 monthly installments. In early 2024, we also launched a consumer finance offering to our customers, in line with the scope of our consumer financing license held through Hepsi Finansman A.Ş. These financing activities have subjected us to inherent risks concerning the credit quality of borrowers, which affects the value of our finance-related assets. For example, in 2025, our expenses increased due to higher expected credit loss provisions relating to our consumer financing solutions. Systemic risks and macroeconomic factors in Türkiye and surrounding markets as well as macro prudential measures taken by the Turkish Government and regulators, discussed under “—Risks Relating to Türkiye” below, can affect the credit quality of our customers, merchants and other counterparties and their ability to make payments on such financing. We are subject to the risk that customers using the BNPL solution or consumer finance loans may be unable or unwilling to provide payment when due and we may incur greater-than-expected financing costs or legal costs as a result. As these are fairly new service offerings, we do not yet have a track record of providing financial services and our credit review procedures have in the past and may in the future be insufficient at evaluating and measuring credit risks such that our costs and financial liabilities from borrowings used to fund our financing activities may exceed the value of our financing assets and returns from financing activities, which could negatively impact our financial condition.
28
Table of Contents
Our system to evaluate our customers’ creditworthiness has in the past, at times, failed and may again in the future fail to provide an accurate representation of their financial condition. Our access to the Credit Bureau of Türkiye may not always allow us to correctly assess the current indebtedness of an applicant. Additionally, our scoring model may fail to evaluate the effects of certain external events, such as changes in the macroeconomic environment, which can quickly alter a customer’s financial profile. Furthermore, we cannot prevent our borrowers from taking out additional loans with other financial institutions or taking other actions that may increase the risk of defaulting on their loans. Failures to accurately assess the creditworthiness of our customers has in the past resulted and may continue to result in a deterioration of our loan portfolio and a corresponding increase in loan impairments, which could have a material adverse effect on our business, financial conditions or results of operations and cash flows. There can be no be assurance that our risk management strategies will adequately protect us against our credit risk or that the current level of recovery will remain unchanged in the future.
The vast majority of our loan portfolio is unsecured. Although we have no significant industry or single borrower concentrations in our loan portfolio in a scenario where a sizable number of borrowers defaulted due to, for example, an economic downturn, we could be unable to recover a significant portion of our loans, which could result in a material financial loss and have a material adverse effect on our financial condition. For example, starting in late 2024, we began to see a general deterioration of economic conditions impacting our borrowers, which has led to an increase in defaults in our loan portfolio in 2025 as compared to prior periods. Impairment losses, which mainly include bad debt provision expenses relating to BNPL receivables and loan receivables, were TRY 846,574 thousand, TRY 532,764 thousand and TRY 87,013 thousand for the years ended December 31, 2025, 2024 and 2023, respectively. While we have taken some measures to reduce our overall credit risk exposure and improve our non-performing loan collection rates, there can be no assurance that these measures will be sufficient to adequately manage the adverse impacts of such economic deteriorations.
Furthermore, it is possible that we could extend our financing activities over time to address new growth opportunities such as “underbanked” populations (i.e., persons with insufficient access to a bank). While we closely monitor non-performing loans, the credit risk of such “underbanked” population may increase and could place additional pressure on the quality of our financial assets.
We are subject to payment-related risks.
We accept payments using a variety of methods, including credit and debit cards, and money transfers. For certain payment methods, including credit and debit cards, we pay various fees to banks and payment companies. These fees may increase over time, which would increase our operating costs and adversely affect our results of operations. Although we use in-house systems for a significant portion of our payment processing, we also use third parties for certain services, such as processing of our prepaid cards as well as transactions through Interbank Card Center of Türkiye. Our business may be disrupted for an extended period of time if any of these companies becomes unwilling or unable to provide these services to us. We are also subject to payment card association operating rules, certification requirements and rules governing electronic funds transfers, which could change or be reinterpreted to make it difficult or impossible for us to comply. If we fail to comply with these rules or requirements, we may be subject to fines and higher transaction fees and/or lose our ability to accept credit and debit card payments from customers and merchants or facilitate other types of online payments, and our business could be harmed. Moreover, although the payment gateways we use are contractually obligated to indemnify us with respect to liability arising from fraudulent payment transactions, if such fraudulent transactions are related to credit card transactions and become excessive, they could potentially result in our losing the right to accept credit cards for payment. If any of these events were to occur, our business, financial condition and results of operations could be adversely affected.
We are susceptible to potentially illegal or improper uses, including fraudulent and illicit sales on the payment methods accepted by us and bank fraud. In addition, our services could be subject to unauthorized credit card use, identity theft, employee fraud or other internal security breaches. We may incur significant costs to protect against the threat of information security breaches or to respond to or alleviate problems caused by any breaches. Laws may require notification to regulators, users or employees and we may be required to reimburse customers, merchants or credit card companies for any funds stolen as a result of any breaches or to provide credit monitoring or identity theft protection in the event of a privacy breach. These requirements, as well as any additional restrictions that may be imposed by credit card companies, could raise our costs significantly and reduce our attractiveness. In addition to the direct costs of such losses, if they are related to credit card transactions and become excessive, they could result in us losing the right to accept credit cards for payment. If we are unable to accept credit cards, our business will be materially adversely affected given that credit cards are the most widely used method for our customers to pay for the products we sell.
29
Table of Contents
We may suffer losses relating to the products we sell through our Direct Sales business.
In connection with our Direct Sales, we purchase products from manufacturers and third parties and subsequently sell such products on our platform. This subjects us to risks relating to managing our inventory turnover. We depend on our forecasts of demand and popularity for a variety of products to make decisions regarding product purchases. Our customers may not order products at the levels expected by us due to our failure to forecast accurately unfavorable market conditions or changes in consumer trends or to anticipate and adequately respond to events such as adverse global or local economic conditions, including recessionary fears or rising inflation, natural or human-caused disasters (including public health crises) or extreme weather (including as a result of climate change), or geopolitical events. This may result in disruptions in our cash conversion cycle or we may suffer losses due to sales below inventory cost or lower than expected price levels. Furthermore, such disruptions may result in overstock and when we overstock products, we may be required to take significant inventory markdowns or write-offs and incur commitment costs, which could materially reduce our profitability. In addition, if the supply of products from manufacturers and third parties deteriorates, we may be unable to obtain the products that customers want to purchase. Manufacturers and third parties may discontinue selling products due to factors that may or may not be within our control. Our inability to secure timely and sufficient supplies of products would negatively affect inventory levels and may have an adverse effect on our financial performance and reputation.
We rely on many service providers in our business, and the nonperformance or loss of a significant third-party provider through bankruptcy, consolidation or otherwise could adversely affect our operations.
We are party to agreements with third-party companies in various aspects of our business model, including the lessors of our fulfillment centers and various logistics providers, and IT and data center service providers (domestically and from outside of Türkiye). For example, if we are unable to maintain or renew leases, or lease other suitable premises on acceptable terms, or if our existing leases are terminated for any reason (including in connection with a lessor’s loss of its ownership rights to such premises), or if a lease’s terms (including rental charges) are revised to our detriment, such matters could have a material adverse effect on our business, financial condition, results of operations and cash flows.
If these third parties do not comply with applicable legal or administrative requirements, were to default on their obligations, or if we lose a significant provider through bankruptcy, consolidation or otherwise, we may be subject to litigation with these third-party providers, fail to renew the respective agreements on commercially acceptable terms, or at all, and, therefore, face the need to switch to new third-party providers, who may provide services to us at higher prices. Our backup systems and contingency planning may not account for all possible scenarios and we may have limited access to alternative sites for our fulfillment operations, logistics services, IT and data center services, or other services and may not be able to timely replace these third parties, or find a replacement on a cost-efficient basis, in the event of disruptions, failures to provide services or other issues with them that may adversely affect our business, financial condition, results of operations and cash flows. Any of these consequences could have a material adverse effect on our business financial condition, results of operations and cash flows.
We operate platforms that include third parties over whose actions we have only partial control.
Our e-commerce services business, other than our Direct Sales, requires the participation of third parties, such as merchants who own the products offered through our Marketplace. We cannot control all actions of these third parties and if they do not perform their functions to our satisfaction or the satisfaction of our users, it may damage the reputation of our platform. Our e-commerce business relies upon merchants to provide and post their products on our platform, and we cannot be certain that the products that they sell will all be legitimate, of a sufficiently high quality or that they will accurately represent the products in their postings. We cannot be certain that efforts to conduct security and know-your-customer procedures with respect to our merchants and screen the listings placed by our merchants periodically and upon receipt of complaints (see Item 4.B. “Information on the Company—Business Overview—Marketplace—Merchants”) will detect every improper third-party action before it reaches our users. Further, while we have no liability for the content provided by third parties or illegal or unlawful activity related to goods or services provided by such third parties on our website as a “hosting service provider” and “electronic commerce intermediary service provider” under Article 5 of the Law on Internet Crimes (as defined under Item 4.B. “Information on the Company—Business Overview—Regulatory Overview”) and Article 9 of the E-Commerce Law, respectively, we may nevertheless face compensation claims, administrative fines or even criminal complaints under Turkish laws for counterfeit products, content or products blocked or prohibited in Türkiye or content or products infringing trademarks or other intellectual property rights if we receive a notification of the unlawful or illegal content and do not take any action (including removing the unlawful content). While we have agreements with each of our merchants that obligate them to carry out their respective businesses in a professional manner and while we are not liable under Turkish law for such merchants’ content or products, except in the circumstances described above, any legal protections we might have could be insufficient to compensate us for our losses and would not be able to repair the damage to our reputation.
30
Table of Contents
If we are unable to compete effectively for advertising spend, or if our merchants reduce advertising spend, our business and results of operations could be materially harmed.
We run a growing advertising business on the Hepsiburada platform. If we are unable to compete effectively for advertising spend, or if merchants reduce advertising spend due to adverse macroeconomic conditions or for other reasons, our business and results of operations could be materially harmed. Our ability to maintain or increase the amount and pricing of advertising sold through our platform will depend on our ability to create more value than our competitors, including by improving the number of users and transactions, monetization and brand awareness. The competitive environment has intensified, with global digital platforms, other e-commerce platforms and online food retailers increasingly vying for a share of global fast moving consumer goods (FMCG) players’ advertising budgets. Failing to provide superior value or deliver advertisements effectively and competitively could harm our reputation, financial condition and operating results. Changes to our advertising policies and data privacy practices, or those of other companies, may adversely affect the advertising that we are able to sell. In addition, the existence and development of technologies that block ads online or affect our ability to customize ads could harm our advertising business.
Furthermore, some of our high-traffic merchants have been investing in their own online sites and mobile applications. This has caused shifts in traffic distribution as their own websites have gained in popularity, which has adversely affected our own traffic and conversion rates. Such merchants have spent, and may continue to spend, an increasing portion of their advertising budgets on their own online sites and applications rather than on our platform. Moreover, their motivation to sell on Hepsiburada may decline as they grow their direct online sales. Failing to retain these merchants and secure their advertising spend could negatively impact our financial condition and operating results.
Our strategic acquisitions may result in operational challenges, and the failure of an acquisition or investment to produce the anticipated results or the inability to fully integrate an acquired company could have an adverse impact on our business, results of operations and financial condition.
We may decide to enter into strategic partnerships or to acquire complementary businesses or technologies in order to expand our operations, products and services and to adjust our business portfolio in response to changing market conditions. For example, in 2022, we completed the acquisition of Hepsi Finansman, through which we have entered the consumer finance sector, and in 2023, we announced a joint investment in one of the leading payment gateway service providers in Türkiye, Craftgate Technology. The success of acquisitions, strategic partnerships or investments is based on our ability to make accurate assumptions regarding the valuation of these operations, growth potential, integration and other factors related to the respective businesses. Our acquisitions or investments may not produce the results that we expect at the time we enter into or complete a given transaction. Such acquisitions and investments can be time-consuming and costly, could create unforeseen operational challenges and expenditures or may not meet our expectations. Furthermore, we may not be able to successfully integrate operations that we acquire, including their personnel, financial systems, distribution or operating procedures. If we fail to successfully integrate acquisitions, our business results of operation and financial condition could suffer. In addition, the integration of any acquired business and their financial results may adversely affect our business, financial condition, results of operations and cash flows.
We may use open source code in a manner that could be harmful to our business.
We use open source code, which is subject to licensing restrictions, in connection with our technology and services. Original developers of open source code do not provide warranties, indemnities or other contractual protections for the use of their source code. The use of such open source code may ultimately require us to replace certain code used in our platform, pay a royalty to use open source code, disclose and freely license all or a portion of our proprietary software code, or discontinue certain aspects of our platform. Additionally, the use of open source code presents certain security risks. As open source code is publicly available, it may be easier for hackers and unauthorized third parties to determine how to breach our websites, apps and systems that rely on open source code. As a result, the use of open source code could have a material adverse effect on our business, financial condition, results of operations and cash flows.
31
Table of Contents
Our operating metrics and competitive information, both internally calculated and provided by third parties and included in this annual report, have changed and may in the future change from time to time, and may be calculated differently from the metrics or competitive information published by our competitors or other third parties in our industry and any perceived inaccuracies or inadequate cross-company comparisons may harm our reputation.
Most of our operating metrics included in this annual report and which we regularly communicate to the market are calculated by us internally. We also provide industry, market and competitive information in this annual report based on studies and reports of third parties (see “Market and Industry Data”).
Our methods of calculating operating metrics such as Active Customers, Number of Orders and GMV and those of third parties in calculating industry, market and competitive information (including market share data) may differ from estimates published by third parties or from similarly titled metrics published by our competitors or other parties due to differences in methodology. For instance, we calculate GMV as the total value of orders/products sold through our platform over a given period of time (including VAT without deducting returns and cancellations), including cargo income (shipping fees related to the products sold through our platform) and excluding other service revenues and transaction fees charged to our merchants. Other companies or third parties may calculate GMV differently, for instance, by excluding returns and cancellations, VAT or cargo income, or including other service revenues. They may also calculate Active Customers or the Number of Orders differently based on differences in the technology used or technical methods used to record such metrics. For example, our controlling shareholder, Kaspi.kz, uses key operational metric definitions that differ in some respects from those historically used by us.
Our methods of calculating operating metrics have changed and may again change over time in order to continue to align with management’s view of the business. For example, starting in 2025, we reported Number of Orders, Active Customers and Order Frequency excluding the contribution of digital products and HepsiExpress, to better align with management’s evolving view of the business and with our controlling shareholder’s way of computing such metrics. We also began disclosing GMV, Marketplace GMV and Number of Orders on the basis of the Kaspi.kz definitions, which deduct returns and cancellations and exclude cargo income. Beginning in Q1 2026, we intend to complete the transition and report the metrics GMV, Marketplace GMV and Number of Orders solely on the basis of the definitions used by Kaspi.kz, and other metrics which are computed using these metrics will therefore also be presented on the basis of the Kaspi.kz definitions. Further, to streamline our financial disclosures, we will no longer use the words “- Kaspi definition” in our metrics’ titles. See Item 5 “Operating and Financial Review and Prospects—Summary Consolidated Financial and Other Data—Key Indicators of Operating and Financial Performance and Non-IFRS Measures—Changes to certain key operating performance indicators.”
We believe our calculation of our metrics and third-party information in this annual report provides investors with a useful tool to understand the value of transactions processed through our platforms. However, if customers, merchants or investors do not perceive our operating metrics or the information on our industry, market and competitive information included in this annual report to be accurate or presented sufficiently consistently over time, our reputation could be materially and adversely affected.
For further information on our operating metrics, their calculation and assumptions relating thereto, see Item 5.B. “Operating and Financial Review and Prospects—Summary Consolidated Financial and Other Data—Key Indicators of Operating and Financial Performance and Non-IFRS Measures. ”
We may not be able to, or may choose not to, insure against all risks we face and may incur losses not covered by insurance, which could have a material adverse effect on our business, financial condition, results of operations, cash flows and prospects.
We rely on insurance coverage to insure against damage and loss to our IT infrastructure and operational assets, including the server hardware, fulfillment centers, network, and storage devices and back-up facilities in our data centers. We maintain insurance coverage for our employees, executives and properties. Although we maintain our existing insurance coverage and purchase any additional insurance coverage as necessary for our operations, including social security and health insurance coverage for our employees and executive officers and liability insurance for our directors and executive committee, we cannot assure you that our insurance coverage provides us with sufficient coverage for all losses, events or incidents. We also may choose not to insure against all risks we face. For example, we do not require our vendors to carry cybersecurity insurance to compensate for any losses that may result from any breach of security and our cybersecurity insurance does not cover any breach of security occurring at our vendors. See “—Unauthorized disclosure of sensitive or confidential customer information or our failure, or the perception by our users that we failed, to comply with privacy laws or properly address privacy concerns could harm our business and reputation with customers, merchants and suppliers.” Therefore, should an uninsured loss or a loss in excess of our insured limits occur, we would lose the capital invested in, and the anticipated revenue from, the affected assets, which could have a material adverse effect on our business, financial condition, results of operations, cash flows and prospects.
32
Table of Contents
We depend upon our senior management, our IT specialists and other talented employees to grow, operate and improve our business; if we fail to attract, retain and motivate key personnel, our business could be adversely affected.
We depend upon the continued services and performance of our senior management team and other key personnel, many of whom have a level of experience and local knowledge that is difficult to replicate. The unexpected departure of any of them from the Company could have a material adverse effect on our business, financial condition, results of operations and cash flows, and there can be no assurance that we will be able to attract or retain suitable replacements for such personnel on acceptable terms or in a timely manner or at all.
Our success and growth strategy also depend on our continued ability to identify, hire, develop, motivate and retain talented employees. Our ability to execute and manage our operations efficiently is dependent upon contributions from all of our employees. Competition for senior management and key IT personnel is intense, and the pool of qualified candidates is relatively limited.
From time to time, some of our key personnel have chosen to leave our Company for various reasons, including personal career development plans or alternative compensation packages. An inability to retain the services of our key personnel or properly manage the working relationship among our management and employees may expose us to employment-related legal or administrative action or adverse publicity, which could adversely affect our reputation, business, prospects, financial condition and results of operations. For example, other leading technology platforms also operate in Türkiye and compete directly with us for the same talent pool, which has a limited number of skilled IT or other professionals.
Our focus on profitability has involved, and may continue to involve, cuts to personnel costs, such as salary and benefits reductions and downsizing efforts. Additionally, we may make certain organizational changes, which may include changes to our management team, our structure, our business strategy and our strategic priorities. For example, in December 2025, we announced a plan for our current chief executive officer, Nilhan Onal, to step down from this role by July 1, 2026 after working with the Company to support an orderly transition. Our efforts to manage costs and to effect other changes may not succeed or may result in disruption, which could adversely affect our business, financial condition, results of operations and cash flows, employee morale and our ability to compete effectively, and in turn impact our revenues, operations and results of operations.
Share-based plans may fail as an employee retention mechanism, as share price declines can reduce the perceived value of equity awards. For example, our Incentive Plan has proven to be an ineffective retention mechanism in a few cases, and in 2025, 12 employees who were covered by our Incentive Plan chose to leave the Company. In July 2025 and in March 2026, our board of directors approved the settlement of certain previously granted share-based payment awards that became due and payable under the existing Incentive Plan. As per the board of directors’ resolutions, these rewards were settled by way of cash payments, instead of equity instruments, to entitled persons, with respect to 5,805,452 ADSs and 1,598,488 ADSs, respectively.
In the future our board of directors, which is the administrator of our Incentive Plan, may determine that the Incentive Plan no longer represents an effective instrument to motivate performance and retention and may decide to replace it with a cash or other bonus system based on performance. However, performance-based awards may also have some limitations that could adversely affect our financial condition. For example, such awards may be unattainable due to macroeconomic factors outside employees’ control, which can adversely affect morale and retention. Moreover, if we limit the scope of or terminate the Incentive Plan, we may not be able to retain and attract employees who expected to be compensated under the plan. Any inability to retain the services of our key personnel or to attract new talent could have a material adverse effect on our business, financial condition, results of operations and cash flows, which could negatively impact the price of our ADSs.
If we lose key employees, training new ones with no prior relevant experience could be time consuming and require a significant amount of resources. We may also need to increase the compensation we pay to our employees from time to time, or change the compensation structure that we provide, in order to retain them. If competition in our industry intensifies, it may be increasingly difficult for us to hire, motivate and retain highly skilled personnel due to significant market demand. If we fail to attract additional highly skilled personnel or retain or motivate our existing personnel, we may be unable to pursue our targets, and our business, financial condition and results of operations could be materially and adversely affected.
An inability to retain and replace existing personnel or to attract new personnel could have a material adverse effect on our business, financial condition, results of operations and cash flows.
33
Table of Contents
Employee misconduct or inadvertent mistakes are difficult to determine and detect and could harm our reputation and business.
We face risks that may arise out of our employees’ lack of knowledge or willful, negligent or involuntary violations of laws, rules and regulations or other misconduct. Misconduct by employees could involve, among other things, the improper use or disclosure of confidential information (including trade secrets and personal information), embezzlement or fraud, any of which could result in regulatory sanctions or fines imposed on us, as well as cause us serious reputational or financial harm. We have experienced fraudulent misconduct by employees in the past, which to date has not caused any material harm to our business. For example, in late 2023, an incident of theft occurred at one of our warehouses with respect to merchandise of a value of approximately TRY 8.5 million (approximately US$140 thousand), in each case shown in currency values as of December 31, 2025. We determined that three then-employees of the Company were involved in the theft. The three employees were dismissed, with criminal charges subsequently filed. Any further misconduct may result in unknown and unmanaged risks and losses. Moreover, our employees may make inadvertent mistakes while carrying out their duties, including where data is compiled manually. Although we have an internal fraud framework in place and have implemented additional measures in 2025 to prevent the recurrence of any such incidents, including updating our code of conduct and our anti-corruption and anti-bribery policies to strengthen our internal control environment and reinforce ethical business practices, there can be no assurance that our internal audits, compliance procedures, security departments, ethics hotline, codes of conduct and other procedures in place that are designed to monitor our employees’ conduct will allow us to discover employee misconduct or mistakes in a timely and effective manner, if at all. It is not always possible to guard against employee misconduct or mistakes and ensure full compliance with our risk management and information policies. The direct and indirect costs of employee misconduct or mistakes can be substantial, and our business, financial condition and results of operations could be materially and adversely affected.
We face uncertainties relating to the growth and profitability of the e-commerce industry in our region and we may face challenges and uncertainties in implementing our e-commerce strategy.
Our future sales depend substantially on consumers’ widespread acceptance and use of e-commerce. While e-commerce has existed in our region for decades, only recently have certain regional e-commerce companies become sizeable. Our future results of operations will depend on numerous factors affecting the development of the e-commerce retail industry in our region, which may be beyond our control. These factors include:
● the growth of the overall retail sector in a hyperinflationary environment where consumers, in general, have faced and may continue to face pressure with respect to their purchasing power;
● the growth rate of internet, broadband, personal computer and smartphone penetration and usage in our region;
● the trust and confidence level of e-commerce consumers, as well as changes in customer demographics and consumer tastes and preferences;
● the selection, pricing and popularity of products that online merchants offer;
● whether alternative retail channels or business models that better address the needs of consumers emerge;
● regulatory changes that may hinder the development of the e-commerce sector; and
● the development of logistics, payment and other ancillary services associated with e-commerce.
Low rates of growth and profitability in the local e-commerce industry as a result of any of these other factors could have a material adverse effect on our business, financial condition, results of operations, cash flows and prospects.
34
Table of Contents
Our business would be adversely affected if last-mile delivery service carriers were classified as employees instead of independent contractors or if other regulatory requirements are imposed on such service carriers and the businesses that utilize their services, and we may incur significant additional expenses if the employees of subcontractors carrying out delivery services are considered our employees or if such service carriers do not fully comply with regulatory requirements applicable to them.
For our Hepsijet operations, we (i) retain the services of self-employed last-mile delivery service carriers and (ii) subcontract last-mile delivery services from third-party service providers.
The classification of self-employed last-mile delivery service carriers as independent contractors has been challenged in courts and by government agencies in various non-Turkish jurisdictions. We believe that our carriers are independent contractors, as they decide for themselves how best to perform their services, they provide a vehicle to perform the delivery services, and they are under no exclusive commitment to us other than not providing delivery services for our competitors.
We also subcontract last-mile delivery services from third-party service providers, and such providers may or may not have employees of their own. Turkish law allows for employees of third-party subcontractors to bring certain claims against us directly, due to our indirect relationship. From time to time in the ordinary course of our operations we have been involved in legal proceedings initiated by employees of third-party subcontractors, such as employment-related claims arising out of termination of our relationship with their employer. While we do not believe the employees of our subcontractors are our employees, several employment-related claims are pending against us before courts specializing in employment law. We do not currently believe that the outcome of these cases will have a material adverse impact to our financial position, either individually or in the aggregate.
If courts or government agencies of competent jurisdictions reclassify our self-employed carriers as our employees instead of independent contractors, or establish an employment relationship between us and the employees of subcontractors, or otherwise find us to be in violation of any Turkish labor law or regulation, we may incur significant additional expenses to compensate those carriers or employees of third-party subcontractors, potentially becoming liable for monetary obligations such as employee benefits, social security contributions, taxes and penalties in addition to the costs associated with defending, settling or resolving these matters. Moreover, the government or government agencies may introduce new legislations or regulations setting forth a minimum percentage of carriers as our employees and restricting the proportion of self-employed carriers used as subcontractors in our operations. Further, any such reclassification of our carriers as employees or such legislative or regulatory restrictions on our ability to contract with self-employed carriers may require us to make certain operational changes going forward, and as a result, our growth, operations, financial condition and operating results could be adversely and materially affected.
Recent amendments to the Highway Transportation Law No. 4925, effective as of May 15, 2025, introduced a mandatory P1 authorization certificate requirement for self-employed couriers. Pursuant to these amendments, couriers providing delivery services are required to obtain the relevant P1 certificate and comply with the obligations set forth under the applicable legislation. Failure by couriers to obtain or maintain the required P1 certificate or to comply with the associated regulatory obligations may result in administrative fines, or restrictions on their ability to provide delivery services. Such enforcement actions could disrupt our delivery operations and reduce the availability of couriers. As part of our efforts to ensure regulatory compliance in our operations, we verify whether couriers providing delivery services possess the required P1 authorization. The need to monitor, verify and ensure compliance with these requirements may increase operational costs and, if compliance cannot be ensured on a timely basis, could adversely affect the continuity and efficiency of our delivery services.
35
Table of Contents
Legal and Regulatory Risks
We are subject to tax audits that may result in additional tax liabilities and are exposed to changes in tax laws and regulations as well as their interpretation and implementation, including Türkiye’s digital service tax and one-off taxes, which could subject us to new liabilities in the future.
We are subject to a variety of taxes in Türkiye including, but not limited to, corporate income tax, withholding tax, value added tax (“VAT”), payroll taxes and social security taxes, among others. The estimated net results of our business are based on tax rates which are currently applicable, as well as current tax regulations and interpretations by tax authorities. A change in applicable corporate tax rates or in general of any tax rule or interpretation made by tax authorities may impact our net results of operations. From time to time, there are changes to tax rates by governmental authorities. For example, effective as of July 2023, the general VAT tax rate was increased from (the previously reduced rate of) 18% to 20%, the reduced VAT of 8% was increased to 10%, and the reduced VAT for certain cleaning products was increased from 8% to 20%. More recently, the Law Amendment to Tax Laws and Certain Laws and Decree No. 375 numbered 7524, published in the Official Gazette No. 32620 in August 2024, introduced a minimum corporate tax rate of 10% to be applied to profits earned in fiscal year 2025 and subsequent tax periods. The purpose of the minimum corporate tax is to ensure that the tax assessed is not less than 10% of corporate income, whenever taxpayers have taxable income before applying relevant exemptions or deductions. The Domestic and Global Minimum Top-Up Corporate Tax (“DMT”) regulations added to the Corporate Tax Law aim to ensure that multinational enterprise (“MNE”) groups exceeding a certain size are taxed at a minimum rate of 15% on the income earned in the countries where they operate. In this context, if the consolidated revenue of the ultimate parent entity exceeds the Turkish Lira equivalent of EUR 750 million in at least two of the previous four accounting periods, a country-by-country tax burden is calculated for the constituent entities within the group, and any tax that remains below 15% is topped up within the framework of specific methods. In addition to our results of operations, any dividends or other distributions paid in respect of any of our ordinary shares may also be adversely affected in case of any changes to the applicable double taxation treaties or any increase in the level of withholding tax, which is currently 15%.
From time to time, we may be subject to tax audits by the Turkish tax authority, which can be time consuming, divert efforts and resources of management and may result in material charges or fines that could have an adverse impact on our financial condition. In February and March 2024, tax audits were initiated for the financial year 2022, with respect to corporate income tax, VAT and Banking and Insurance Transactions Tax (“BITT”) on February 29, 2024, for D Ödeme Elektronik Para ve Ödeme Hizmetleri A.Ş. (“D-Ödeme”) and on March 5, 2024 for D Fast Dağıtım Hizmetleri ve Lojistik A.Ş. (“D-Fast”), respectively. These tax audits are in process, so we are not able to quantify the associated risk, at this stage. A limited-scope tax audit focused on our gift vouchers and digital codes was also initiated in October 2023 for the Company. The review was submitted to the Turkish Tax Inspection Board’s settlement commission on May 5, 2025, which levied total tax, interest and penalty charges of approximately TRY 0.9 million. While we have paid the tax and interest charges, we have contested the imposition of a penalty charge. The lower court ruled in favor of the Company on January 15, 2026; however the tax authority has the right to appeal and the case remains ongoing. Regarding the 2020 fiscal year, a VAT audit was launched for D-MARKET Elektronik Hizmetler ve Ticaret A.Ş. (“D-Market”) in August 2025 and finalized in December 2025, resulting in an additional tax payment of TRY 0.2 million.
Furthermore, we may be harmed by new or amended tax laws applicable to our industry. For example, in March 2020, a digital service tax (the “DST”) took effect in Türkiye imposing a 7.5% tax on revenue generated from a broad range of digital services, including digital advertising, digital content sales and digital platform services. In December 2025, the 7.5% rate was reduced to 5% starting from January 1, 2026, and to 2.5% starting from January 1, 2027. The DST only applies to companies that generate revenues from covered digital services of at least: (i) TRY 20 million in Türkiye and (ii) €750 million globally. As of the date of this annual report, we are not subject to the DST as our revenues from such services are below the threshold. However, as a result of our growth, we may in the future exceed such threshold if it is not increased, or we may exceed such threshold if it is reduced, at which time our operations may become subject to the DST. Further, the Presidential Decree numbered 9284 published in the Official Gazette in December 2024, imposed on merchants selling their products through marketplaces, such as our platform, a withholding tax equal to 1% starting from January 1, 2025. With an amendment to the Income Tax Law No. 193, published in the Official Gazette in August 2024, as of January 1, 2025, the Company is obliged to deduct withholding tax on behalf of merchants selling through our platforms as an offset to the income taxes payable by such merchants, due to the Company’s role as an intermediary service provider, as defined in the E-Commerce Law. Although the new rules have not introduced a new tax liability for Hepsiburada, the Company is exposed to increased compliance risks in connection with the performance of its new obligations. Moreover, merchants may choose not to sell through marketplaces and instead sell directly to customers or offline to avoid the application of the withholding tax.
36
Table of Contents
Additionally, the Decision on the Amendment of Certain Articles of the Customs Law No. 4458 published in the Official Gazette in August 2024, amended the customs laws to, in relevant part, reduce the value limit, from €150 to €30, for simplified processing of imported consumer goods sent to individuals by mail or express courier and raised the applicable Single and Fixed Duty for such goods, from 20% to 30% for goods imported from the EU and from 30% to 60% for goods imported from non-EU countries. The simplified regime for e-commerce platform shipments then effectively ended on January 30, 2026. Increased duties prompted us to downsize our HepsiGlobal operations, and the introduction of any similar customs restrictions in the future may hinder the growth of some of our operations
We may also be subject to one-off taxes. For example, in February 2023, two earthquakes hit the southeastern region of Türkiye. In response to the effects of these earthquakes, in March 2023, an earthquake tax was implemented to generate funds. While we were not subject to this one-time earthquake tax, any amendments to the tax legislation or subsequent practice of tax authorities may require us to pay a one-off tax in the future, including on a retroactive basis for prior accounting periods.
If existing tax laws, rules or regulations in our markets are amended, or if new tax laws, rules or regulations are enacted, including with respect to the DST, sales tax, value-added taxes, withholding taxes, revenue-based taxes, earthquake tax or other similar taxes applicable to the digital economy or multi-national businesses, the results of these changes could increase our effective tax rate, tax liabilities and/or associated costs. Possible implications may include double taxation, multiple levels of taxation, additional obligations, prospectively or retrospectively, as well as imposition of interest and penalties if non-compliance is determined. Potential heightened tax law enforcement against us could have a material adverse effect on our business, financial condition, results of operations and cash flows.
We have in the past been, and may again in the future be, subject to administrative fines imposed by the Turkish Competition Authority, and our reputation may be harmed if we do not comply with Turkish competition laws and regulations or any applicable binding commitments imposed by the Turkish Competition Authority on the Company.
Our business is subject to Turkish competition laws and regulations. We have been, and may continue to be, subject to investigations by the Turkish Competition Authority (the “TCA”), which monitors compliance with these laws and regulations.
For example, in April 2021, the TCA initiated an investigation against 37 companies in total regarding anti-competitive agreements in the labor markets (including companies operating in the e-commerce, retail, broadcasting and fast-food industries, but excluding us) to determine whether those entities had violated the Law on the Protection of Competition (the “Competition Law”), which prohibits such anti-competitive agreements. The allegations that led to the investigation solely related to direct or indirect agreements regarding non-solicitation of employees that potentially restricted competition in the labor markets in Türkiye. In June 2021, without notice, TCA officials conducted an on-site inspection at our headquarters and reviewed the digital correspondence of a limited number of senior managers and human resources employees. In August 2021, we received a notification from the TCA stating that the Competition Board, the decision making body of the TCA, had decided to initiate an investigation against 11 additional companies including Hepsiburada the subject of which was the same as the existing April 2021 investigation, and to merge these two investigations. In April 2022, we received notice that the rapporteurs completed an investigation report stating their opinion that we violated the Competition Law that prohibits anti-competitive agreements in the labor markets and an administrative fine should be imposed. Following an oral hearing meeting on July 18, 2023, the Competition Board concluded its investigation and rendered its decision dated July 26, 2023 and numbered 23-34/649-218, stating that the Company had violated Article 4 of the Competition Law prohibiting anti-competitive agreements. The Competition Board imposed an administrative fine in the amount of TRY 3,985 thousand (with a 25% discount on early payment) on Hepsiburada. The reasoned decision of the Competition Board was served on Hepsiburada on June 27, 2025 and was subsequently published on the official website of the TCA on July 10, 2025. The administrative fine imposed by the Competition Board has been paid by applying the 25% early payment discount and the process has been completed.
37
Table of Contents
In August 2023, the TCA initiated a separate preliminary investigation to determine whether Hepsiburada had violated Article 4 of the Competition Law in connection with the Company’s automatic pricing mechanism (“APM”) offered to sellers in our Marketplace. On that date, the TCA conducted an on-site inspection at Hepsiburada’s headquarters and the Company subsequently submitted the information and documents requested by the TCA. As a result of the preliminary investigation, the Competition Board decided to initiate an investigation against Hepsiburada, together with other e-commerce platforms, namely, DSM Grup Danışmanlık İletişim ve Satış Ticaret A.Ş (Trendyol) and Amazon Turkey Perakende Hizmetleri Limited, and we were notified of the investigation decision in October 2023. Also in October 2023, a second on-site inspection was conducted by the TCA at the headquarters of Hepsiburada. The first written defense was submitted in November 2023. In January 2024, we submitted an offer of commitments to the TCA intended to address the TCA’s possible competition concerns related to the APM and to end the investigation without any administrative fine. The Competition Board accepted the proposed commitments with its decision dated October 3, 2024 and numbered 24-40/951-410, which was notified to us in October 2024. The commitment decision required that the Company make certain changes to the APM, including to the Buy Box algorithm. Accordingly, the option to automatically match the Buy Box price offered to sellers had to be removed from the APM and sellers must only be offered the options to “set price below Buy Box” and “set price above Buy Box.” In addition, the Company must not directly or indirectly incentivize the sellers to use the APM. The Company is required to implement the commitments for an indefinite period. These commitments resolved the TCA’s concerns on the APM’s possible facilitation of price coordination between sellers. These commitments did not have any material adverse effect on the Company’s operations and business. However, to ensure compliance with the commitments, the Company was required to submit annual reports to the TCA for a period of three years, starting one year after the notification of the reasoned decision received on February 20, 2025. The first report was submitted in December 2025. As we disclosed in the submitted report that the application of the automatic pricing mechanism had been terminated as of April 30, 2025, the Competition Authority notified us on January 15, 2026 that our obligation to submit reports has ended.
In March 2024, the TCA initiated a separate preliminary investigation to determine whether one of our merchants and e-commerce platforms including Hepsiburada had violated Articles 4 and 6 of the Competition Law. We believe that the preliminary investigation likely related to potential sales restrictions on the products and brands of which this merchant is the authorized distributor within Türkiye. However, as the statutory period to conclude a preliminary investigation has expired without any notification from the TCA regarding the initiation of an investigation, it is possible that the relevant complaint has been dismissed.
Most recently, in 2025, the Competition Board concluded a preliminary investigation initiated against Hepsiburada together with DSM Grup Danışmanlık İletişim ve Satış Ticaret A.Ş (Trendyol) concerning allegations that Hepsiburada and Trendyol had excluded their competitors in the postal and cargo services sector by leveraging their dominant position in the e-commerce sector. With its decision dated August 14, 2025 and numbered 25-31/746-443, the Competition Board decided not to initiate a full-fledged investigation.
Although we believe that our operations are in material compliance with Turkish competition laws, any investigations that may be conducted by the TCA in the future into our business conduct, and the imposition of related administrative fines or obligations on us, could have a material adverse effect on our reputation, business, prospects, financial condition and results of operations.
See “—We are subject to laws and government regulations relating to competition and antitrust, and changes to these laws or any actual or perceived failure by us to comply with such laws and regulations could materially and adversely affect our business.”
We are subject to extensive laws and government regulations across our business, and changes to these laws or any actual or perceived failure by us to comply with such laws and regulations could materially and adversely affect our business, financial condition, results of operations or cash flows.
Our business is impacted by laws and regulations in Türkiye that affect the industries our businesses operate in, and their scope has increased significantly in recent years. We are subject to a variety of regulations, including those relating to e-commerce, internet applications or content services, privacy and data protection, labor and employment laws, competition, intellectual property, cybersecurity, virtual items, national security, content restrictions, consumer protection, postal and transportation services, prevention of money laundering and financing criminal activity and terrorism, digital financial services regulation, electronic payment services regulation, consumer finance regulation, traffic and transportation regulation and travel regulations.
38
Table of Contents
For example, we are required under Turkish law to obtain a workplace opening and operation permit from the relevant authorities before beginning operations at each of our facilities. These permits are subject to examination or verification by the relevant authorities. We have not obtained, and in the future may fail to obtain, such permits for some of our facilities before beginning to operate them, which may result in administrative fines or penalties or even sanctions such as the temporary suspension of our operations at those facilities lacking valid permits, which could materially and adversely affect our business, financial condition, results of operations and cash flows.
Any expansion in terms of our services and geographic coverage, such as our ramp-up of consumer finance loans through Hepsi Finansman and our geographical expansion into cross-border sales through HepsiGlobal have in the past subjected us to, and may in the future further subject us to, increased or new regulatory scrutiny and compliance requirements, dealings with new regulatory bodies and other risks that may be costly or difficult to comply with, such as payment services regulations, consumer finance services regulations, compliance with privacy laws and data security laws, including the GDPR, and compliance costs across different legal systems, including customs laws. We may have to come up with, adapt and implement different operating practices and protocols depending on the requirements of new regulators, which may require us to expend substantial resources. In addition, regulatory changes or enforcement actions in these areas may be implemented on short notice, limiting our ability to adapt our operations without disruption. In certain cases, such regulatory changes may adversely affect our growth plans and we may not be able to achieve our targets in those areas.
We are required to hold, and do currently hold, licenses in order to offer such solutions, but since legislation around these offerings is continuously evolving and may be subject to different interpretation by the relevant regulatory authorities in the future, there can be no assurance that we will not be required to obtain any additional permits or licenses in the future with respect to any of our current or future solutions. If we fail to obtain such permits or licenses in the future, our business, prospects, financial condition and results of operations could be materially and adversely affected.
Regulators may periodically re-examine and increase enforcement of compliance obligations, which may require us or our business partners to further revise or expand the compliance program. Such compliance requirements may also make it more burdensome to use our services and products, which could potentially discourage users from using our services and products.
See also “—We are subject to laws and government regulations applicable to payment services and consumer finance businesses, and changes to these laws or any actual or perceived failure by us to comply with such laws and regulations could materially and adversely affect our business,” “—We are subject to laws and government regulations relating to competition and antitrust, and changes to these laws or any actual or perceived failure by us to comply with such laws and regulations could materially and adversely affect our business,” “We are subject to laws and government regulations relating to postal services which include authorization requirements applicable to delivery, courier and logistics-related activities and changes to these laws or any actual or perceived failure by us to comply with such laws and regulations could materially and adversely affect our business,” “— We have in the past been, and may again in the future be, subject to administrative fines imposed by the Personal Data Protection Authority, and our reputation may be harmed if we do not comply with Turkish Personal Data Protection Law No. 6698,” “—A cybersecurity incident impacting our systems or the service of our providers, including undetected software errors and hacking, may cause material delays or interruptions in our information systems and may reduce the use of our services and damage our brand reputation, which may hinder our ability to conduct our business effectively or result in lost revenues or other costs, including in connection with increasing compliance requirements” and “—Risks Relating to Türkiye—Internet and e-commerce regulation in Türkiye is recent, has undergone changes since its inception and is subject to further development.”
We are subject to laws and government regulations applicable to payment services and consumer finance businesses, and changes to these laws or any actual or perceived failure by us to comply with such laws and regulations could materially and adversely affect our business, financial condition, results of operations or cash flows.
The provision of financial services through Hepsipay and Hepsi Finansman, such as e-wallet, e-money, payment facilitation services and consumer lending, is highly regulated and subject to a broad range of complex laws and regulations that are rapidly changing.
39
Table of Contents
For example, after we obtained licenses from the Banking Regulation and Supervision Agency (“BRSA”) to operate financial services through Hepsipay, in 2019 an amendment to the relevant legislation changed the competent authority regulating payment companies to the Central Bank of the Republic of Türkiye (the “Central Bank”). The Central Bank has in the past and may in the future impose new or additional licensing requirements, capital commitments, governance standards, reporting obligations or other regulatory requirements, requiring us to devote substantial operational and financial resources to comply with such requirements. For example, in December 2021, the Central Bank published the Regulation on Payment Services and Electronic Money Issuance and Payment Service Providers (the “Payment Services Regulation”) and the Communiqué on Information Systems of Payment and Electronic Money Institutions and Data Sharing Services in the Field of Payment Services Providers (the “Payment Services Communiqué”), in Türkiye’s Official Gazette, requiring compliance within one year with the following requirements, among others, on e-commerce payment services such as Hepsipay’s wallet service: (i) to keep collateral at the Central Bank, in accordance with the number of customers, volume of transactions and other conditions specified therein, (ii) to comply with higher minimum equity requirement, and (iii) to comply with additional obligations such as remote know-your-customer diligence. On October 7, 2023, the Central Bank introduced certain amendments to the Payment Services Regulation within key areas, including, among others, digital wallets, payment service providers, e-money issuers, card-based payment instruments, the scope of Central Bank permissions for share transfers, and the protection of payment funds. Notably, the amendments imposed new requirements on payment service providers such as Hepsipay to obtain certain licenses and authorizations for their activities, including an operating license for providers offering digital wallet services and an authorization for digital wallet service providers involved in transferring funds to issue electronic money. These new statutory permits were initially due to be obtained from the Central Bank by October 7, 2024 but the Central Bank extended this deadline to December 31, 2025. Hepsipay obtained the necessary license permits for its digital wallet services with the Central Bank Decision No. 11765/21364 dated December 27, 2024, which was published in the Official Gazette on January 10, 2025.
Further, on January 27, 2024, the Official Gazette published the Communiqué on the Redetermination of Minimum Equity Amounts for Payments and Electronic Money Institutions, revising the minimum equity amounts for payment and electronic money institutions set forth in the Payment Services Regulation. Payment and electronic money institutions were mandated to adhere to the updated minimum equity requirements by June 30, 2024, when the communiqué came into effect. Following this date, Hepsipay inadvertently had a 54-day period in which its capital level was below the minimum regulatory thresholds of TRY 55 million. Hepsipay raised its capital to above the minimum regulatory threshold as soon as information regarding this breach was discovered, but in line with regulatory requirements, the infringement was reported to the Central Bank. Although Hepsipay has never intentionally had insufficient capital and its shareholder increased such capital to comply with regulations at the first instance such requirement was apparent, this may still result in a fine. The Central Bank may in its discretion impose an administrative fine on Hepsipay ranging from TRY 209,984 to TRY 4,724,676 for the year 2024 for this infringement. The aforementioned minimum equity amounts for payment and electronic money institutions were further revised pursuant to the Communiqué on the Redetermination of Minimum Equity Amounts for Payments and Electronic Money Institutions, dated January 31, 2026. Accordingly, the minimum regulatory equity requirement applicable to Hepsipay was set at TRY 105 million, which was met by Hepsipay as of the date of this report.
In April 2026, the Central Bank requested a formal defense from Hepsipay regarding indirect shareholding changes at the D-Market level following the capital increase in December 2025 that increased Kaspi.kz’s shareholding and caused certain other shareholders’ stakes to cross certain regulatory notification thresholds, which may trigger a requirement for prior regulatory approval. The Central Bank noted that only an ex-post notification had been made. The Central Bank also requested clarification as to whether the capital decrease and simultaneous capital increase carried out in December 2025 resulted in any breach of minimum equity requirements. The Company is in the process of preparing its formal response. Should the Central Bank determine that a violation has occurred within the scope of the investigations, for each violation it may impose an administrative fine ranging from TRY 370,467 to TRY 8,335,716.
Except as set forth above, Hepsipay believes it has complied with its obligations under the communiqué as of the date of this annual report. However, any additional failure to comply with these regulations may result in the limitation, suspension or termination of services or the imposition of penalties, including fines which could have a material adverse effect on our business, results of operations, financial condition and cash flows.
40
Table of Contents
Additionally, amendments to the “Regulation on Measures Regarding Prevention on Laundering Proceeds of Crimes and Financing of Terrorism” and the General Communiqué (Serial No: 5) of MASAK, which were published in the Official Gazette on December 25, 2024, have materially affected Hepsipay’s KYC obligations. With the new regulation, the identity verification processes in electronic money services, including those made with prepaid cards, have been significantly tightened. Starting from March 25, 2025, customers who fall outside the definition of “Anonymous Customers” were required to complete a remote identity verification process in order to execute their payments through Hepsipay. Any failure to comply with applicable rules may result in the limitation, suspension or termination of services or the imposition of penalties, including administrative fines which could have a material adverse effect on our business, results of operations, financial condition and cash flows. As part of MASAK’s routine inspections of regulated entities, a compliance audit was initiated at Hepsipay on April 8, 2025. Within the scope of this audit, certain deficiencies were identified in the client identity verification processes relating to 2023. Hepsipay was notified of the administrative fine associated with these findings on July 21, 2025, and the payment was made within one month following the notification. The total amount of the fine was TRY 12,125,090, which was reduced to TRY 9,093,818 pursuant to a 25% early payment discount. These findings solely relate to the 2023 period, and the identified deficiencies have since been fully addressed and remedied by Hepsipay within the applicable regulatory timeframes.
In addition, within the scope of the Communiqué on the Management and Supervision of IT Systems of Payment Institutions and Electronic Money Institutions, a regular independent audit is required to be performed on Hepsipay every two years. Seven instances of non compliance were found as a result of the audit in respect of financial year 2023 and the report was sent to the Central Bank. The Central Bank imposed an administrative fine in the amount of TRY 1,060,128 for these breaches, which was reduced to TRY 795,096 pursuant to a 25% early payment discount. Hepsipay’s 2025 audit was concluded in March 2026. Out of 16 findings identified during the audit, nine were resolved during the audit process, and the resolution and monitoring of the remaining seven findings are being followed up. Although we do not anticipate that an administrative fine will be imposed during this period as a result of the audit, the Central Bank has the ability to impose such fines to sanction non-compliance.
Moreover, Hepsiburada acts as a commercial representative of merchants and funds are transferred to the merchants through Hepsiburada, and Hepsijet also acts as a commercial representative within the scope of the cash-on-delivery services it provides to its third-party corporate customers. According to the Payment Services Regulation and the Payment Services Communiqué, a report must be filed with the Central Bank in January of each year in which the amount of intermediary service provider activities exceeds TRY 50 million within the prior 12-month period. As a consequence of this provision, Hepsiburada has submitted reports annually since 2022, and Hepsijet has submitted reports annually since 2024. The Central Bank is the competent authority to evaluate our reports to determine whether our reported activity qualifies as a payment service, within the scope of the Payment Services Regulation and the Payment Services Communiqué. If the Central Bank concludes that our reported activity is a payment service, we may be required to restructure our service such that we transfer funds to merchants through Hepsipay instead of Hepsiburada or Hepsijet, respectively.
Pursuant to the amendment to the Regulation on Measures to Prevent Laundering of Proceeds of Crime and the Financing of Terrorism, medium, large and very large-scale electronic commerce intermediary service providers (i.e., marketplaces) have been included in the scope of “regulated entities” under MASAK legislation as of February 25, 2025, with respect to transactions conducted with sellers/suppliers. We are also subject to the Turkish Regulation on Measures to Prevent Laundering of Proceeds of Crime and the Financing of Terrorism (the “AMLCFT”) due to Hepsiburada being deemed (i) an “intermediary in the purchase and sale of precious metals, stones or jewels” because we conduct the sale of gold and (ii) as “operating in the field of gambling” because we offer digital products on our platform, including non-cash games, pursuant to an authorization obtained from the Turkish General Directorate of the National Lottery Administration (the “GDNL”). Accordingly, we are required to, among other things, carry out certain KYC checks, report suspicious transactions and monitor certain activities. Any failure to comply with the terms of the AMLCFT may result in the limitation, suspension or termination of our services and/or imposition of civil and criminal penalties, and fines. Additionally, we are subject to the rules and regulations of the GDNL regarding non-cash games offered on our platform. In case of any failure to comply with the rules and regulations of the GDNL, our authorization granted by the GDNL may be cancelled, and we may be subject to administrative fines. Following the recent regulatory amendments, Hepsiburada became subject to MASAK supervision as a regulated entity with respect to certain activities. Accordingly, MASAK has initiated compliance audits in 2025 in relation to Hepsiburada’s AML/CFT obligations, as well as inspections conducted by MASAK auditors in connection with gaming-related activities. These audits are currently ongoing. Any adverse findings arising from such inspections may result in administrative fines, sanctions or other remedial measures being imposed on Hepsiburada, which could adversely affect Hepsiburada’s operations, financial condition and reputation.
41
Table of Contents
Following the Regulation Amending the Regulation on Measures to Prevent Laundering of Proceeds of Crime and Financing of Terrorism (Decree No: 9305), the Regulation Amending the Regulation on the Compliance Program Regarding Obligations to Prevent Laundering of Proceeds of Crime and Financing of Terrorism, and the Communiqué Amending the General Communiqué of the Financial Crimes Investigation Board (Serial No: 5) (Serial No: 26), published by MASAK on December 25, 2024, medium, large, or very large-scale electronic commerce intermediary service providers carrying out transactions with electronic commerce service providers have become subject to Law No. 5549 on Prevention of Laundering of Proceeds of Crime and its secondary regulations, without any transaction limit, pursuant to which, in relevant part, service providers are required to verify the identity of electronic commerce service providers in accordance with the provisions set forth in this legislation. Failure to comply with these regulations may result in an administrative fine of TRY 284,449 for each unverified electronic commerce service provider and approximately TRY 4.8 million in case of non-compliance with KYC requirements and obligations to monitor and report suspicious activities. The Company has appointed a Compliance Officer and a Deputy Compliance Officer, as required by the legislation, but has determined that completion of the implementation of identity verification processes for our existing electronic commerce service providers, as well as newly acquired clients, within the timeframe required by the legislation would not be feasible and so we have submitted a formal request for an extension of this compliance period. MASAK has broad powers to conduct on-site inspections, request information and documentation, impose administrative fines and refer matters for criminal investigation, and recent enforcement practices demonstrate that violations of anti-corruption and money laundering legislation may lead to severe outcomes for both individuals and entities. Accordingly, these developments have increased our exposure to regulatory inspections, investigations and enforcement actions. In addition, we are in the process of restructuring and strengthening our compliance framework, including our internal compliance function, internal control mechanisms and enterprise risk management tools, through organizational changes, additional hires and departmentalization. Despite these efforts, the scope of MASAK’s oversight may result in compliance costs and more frequent inspections or investigations, which could materially and adversely affect our business, financial condition, results of operations and cash flows. See Item 4.B. “Information on the Company—Business Overview—Regulatory Overview.”
Our consumer finance company, Hepsi Finansman, is under the regulatory authority of the BRSA, and subject to regulations and audits by them. Further, Hepsipay and Hepsi Finansman are subject to rules and regulations by MASAK. MASAK is responsible for overseeing compliance with the rules on national terrorist asset freezing under Law No. 6415 on the Prevention of the Financing of Terrorism and may impose criminal penalties and administrative fines in case of failure to comply with the rules. For example, in October 2023, MASAK initiated investigations against Hepsipay due to alleged breaches of Law No. 6415, specifically related to the opening of wallet accounts for 17 clients who were subject to asset freezing orders due to systemic errors. On March 25, 2024, MASAK informed Hepsipay that it had imposed administrative fines totaling TRY 1,290 thousand on Hepsipay. Hepsipay settled this penalty on April 3, 2024, availing itself of an early payment discount of 25%. In addition, in December 2025, MASAK initiated a routine compliance inspection (obligations audit) at Hepsi Finansman. Although no significant non-compliance has been identified as of the date of this report, the inspection process is ongoing and may still result in administrative sanctions or fines in accordance with applicable regulations.
In addition, in March 2026, the BRSA requested a formal defense from Hepsi Finansman in relation to four customer complaints concerning delays in the submission of legal follow-up status closure notifications to the Credit Bureau of Türkiye, with delays ranging from one to seven months after the relevant customers had fully repaid their obligations. The Company submitted its formal response on March 30, 2026, explaining that the delays were due to operational process deficiencies and that remedial actions had been implemented. Should the BRSA determine that a violation has occurred within the scope of the investigations, it may impose administrative fines ranging from TRY 377,783 to TRY 566,679 per violation.
Further, Hepsi Finansman was acquired with its existing customers, loans and associated data and contracts. Therefore, it is also subject to audit for its past business by the related parties. Although we carry indemnifications from the previous shareholders due to these past operations, any future findings might create regulatory fines as well as disruptions to daily business, some of which may not be covered by these indemnifications.
We anticipate devoting substantial operational and financial resources to comply with the requirements of all the existing and new regulations and communiqués associated with our financial services businesses, and change our internal rules and procedures in accordance with any predefined and future changes. We have in the past, and may in the future, face additional audits and investigations by regulators or third parties appointed by the regulators for alleged violations of such requirements. Any further investigations may require resources to respond to and could result in further penalties or fines if it is determined that we violated any regulatory requirements, which may adversely impact our business and financial condition.
42
Table of Contents
We are subject to laws and government regulations relating to competition and antitrust, and changes to these laws or any actual or perceived failure by us to comply with such laws and regulations could materially and adversely affect our business, financial condition, results of operations or cash flows.
The TCA may from time to time modify regulations or adopt new regulations in response to developments of new markets and market behaviors in different sectors or industries. In order to better understand these developing markets such as the emerging e-marketplace platform sector, the market forces and behaviors, as well as to ensure their operational efficiency and identify any potential competition problems, the TCA undertakes routine inquiries and information-gathering processes with various stakeholders within these developing markets. Such sector inquiries are not company-specific investigations and do not result in company-specific administrative fines and obligations. However, if the TCA adopts new rules and regulations which we may need to comply with in the future, the additional regulatory burden may have a negative impact on our operations and financial results. For example, the TCA has in the past launched a sector inquiry in relation to the online advertisement market, which remains a developing market in Türkiye. The TCA published its final report as a result of this sector inquiry in May 2025. Similarly, in June 2020, the TCA commenced a sector inquiry into the e-marketplace platforms sector. The TCA issued its final report on April 14, 2022, which may result in additional regulations for the e-marketplace platform sector with which we may be required to comply in the future.
For example, in June 2024, the “Draft Regulation Amending the Law on the Protection of Competition” (the “Draft Competition Law Amendments”) was circulated by the TCA for public comment. The Draft Competition Law Amendments propose to expand the scope of the Competition Law to include the concept of a “gatekeeper” (“Gatekeeper”) for basic platform services, which we believe would include electronic commerce intermediary service providers like us, as currently defined. The Draft Competition Law Amendments would regulate the conduct and obligations of Gatekeepers. The Draft Competition Law Amendments state that quantitative thresholds will be determined by a Communiqué that will be released by the TCA, taking into account the annual gross revenues and the number of end-users or the number of commercial users. The net transaction volume threshold for “large-scale electronic commerce intermediary service providers” under the Draft Competition Law Amendments is expected to capture providers currently falling within the scope of the E-commerce Law. Where an enterprise does not exceed the quantitative thresholds stipulated in the relevant Communiqué, the TCA may also make a determination for inclusion based on qualitative criteria, by taking into account some or all of the following elements: network effect, data ownership, vertically integrated and conglomerate structure, economies of scale and scope, lock-in and evolution effect, transition costs, multiple access, user trends, and mergers and acquisitions carried out by the enterprise in the context of the structure of its basic platform services. The Draft Competition Law Amendments propose to introduce several restrictions on Gatekeepers such as (i) limitations on the use of data, (ii) prohibitions on the implementation of the use of most favored customer (MFC) conditions and exclusivity, and (iii) restrictions on providing ancillary services that are connected with the main services. If Parliament were to approve such amendments or similar amendments to the Competition Law, this would result in a substantial additional regulatory burden for us, and we would need to devote substantial operational and financial resources to ensure compliance with such regulatory requirements, which could have an adverse effect on our operations and financial results.
We are subject to laws and government regulations relating to postal services, which include authorization requirements applicable to delivery, courier and logistics-related activities and changes to these laws or any actual or perceived failure by us to comply with such laws and regulations could materially and adversely affect our business, financial condition, results of operations or cash flows.
Pursuant to recent amendments to the Regulation on Authorization in the Postal Sector, which came into effect on March 8, 2025, entities conducting postal services, which include the acceptance, collection, processing, dispatch, distribution and delivery of products sold or marketed through a digital platform, are required to obtain authorization from the Information and Communication Technologies Authority of Türkiye. Delivery and logistics services relating to products sold on our marketplace platform are carried out either by third-party providers or our last-mile delivery service provider subsidiary, therefore Hepsiburada is outside of the scope of this amendment. Hepsijet, which operates as a duly authorized postal service provider, already holds the relevant postal services authorization under applicable legislation.
In addition, under the Regulation on Authorization in the Postal Sector, companies that are authorized to provide postal services on a nationwide basis, including Hepsijet, are required to meet certain ongoing regulatory obligations, including maintaining a minimum paid-in capital of TRY 5,000,000, complying with environmental sustainability requirements in line with internationally recognized standards and submitting annual compliance reports to the Information and Communication Technologies Authority, as well as electronically monitoring and retaining records of the daily and weekly working hours of personnel engaged in distribution and delivery activities.
43
Table of Contents
Failure to comply with these and other applicable authorization requirements may result in administrative sanctions or operational restrictions, which could increase our compliance costs, disrupt our delivery operations and materially and adversely affect our business, financial condition, results of operations and cash flows.
We have in the past been, and may again in the future be, subject to administrative fines imposed by the Personal Data Protection Authority, and our reputation may be harmed if we do not comply with Turkish Personal Data Protection Law No. 6698.
Our Company is subject to the Turkish Law on the Protection of Personal Data (the “LPPD”) and other relevant secondary legislation on the protection of personal data. The Personal Data Protection Board (the “PDP Board”) may request information and documents ex officio or upon complaint, and if it determines that there is a violation of the LPPD as a result of its investigation, it may decide to issue instructions and impose administrative fines. In addition, there is a risk that the decisions to be taken by the PDP Board in investigations may be published on the PDP Authority’s website and will identify the subject company. If a decision against the Company is published on the PDP Authority’s website, in addition to any sanctions that may be imposed with such a decision, our reputation may be negatively and materially affected.
Our Company was subject to six investigations conducted by the Personal Data Protection Authority (“PDP Authority”) in 2022 and 2023. We settled three of these investigations by paying the administrative fines imposed by the PDP Authority (benefiting from a discount). For the remaining three investigations, the PDP Authority decided to close the investigation without imposing any administrative fine.
In February 2024, in accordance with its obligations as a data controller under the LPPD, we notified the PDP Authority of unauthorized access to some customer personal information in connection with a cybersecurity incident. In September 2024, the PDP Authority determined that we had failed to take technical and administrative measures necessary to prevent data breaches. The PDP Authority imposed an administrative fine of TRY 3,250,000, which was paid on February 25, 2026. We submitted objections against the PDP Authority’s decision pursuant to Article 11 of the Administrative Procedural Law requesting the annulment or the amendment of the decision, but our objections were dismissed. On November 20, 2024, we initiated legal proceedings to challenge the fine, and this process is pending before the court of appeal as of the date of this annual report. See “—A cybersecurity incident impacting our systems or the service of our providers, including undetected software errors and hacking, may cause material delays or interruptions in our information systems and may reduce the use of our services and damage our brand reputation, which may hinder our ability to conduct our business effectively or result in lost revenues or other costs, including in connection with increasing compliance requirements.”
In addition, in September 2025, we received two separate information and document requests from the PDP Authority in connection with customer complaints relating to the alleged unlawful use of personal data by a third-party seller and the restriction of certain customer accounts due to suspected misuse. We submitted our responses, together with the requested information and documentation, within the statutory deadlines. As of the date of this annual report, the PDP Authority has not issued any further requests, decisions or administrative sanctions in relation to these matters. Should the PDP Authority determine that a violation has occurred within the scope of the investigations, for each violation it may impose administrative fines ranging from TRY 256,357 to TRY 17,092,242 and/or issue instructions for the rectification of the relevant processes.
In addition, in December 2025, the PDP Authority started an investigation against Hepsipay after a former employee filed a complaint regarding employee-related personal data processing activities and alleging deficiencies in the VERBIS registration. The PDP Authority sent a comprehensive set of questions, and all requested information and documents have been duly submitted. Should the PDP Authority determines that a violation has occurred within the scope of the investigation, it may for each violation impose administrative fines ranging from TRY 204,285 to TRY 17,092,242 and/or issue instructions for the rectification of the relevant processes.
44
Table of Contents
If we fail to obtain intellectual property rights protection or adequately protect our intellectual property rights, or if we infringe third-party intellectual property rights, our business, prospects, financial condition and results of operations could be adversely affected.
Our trademarks, service marks, copyrights, trade dress, trade secrets, proprietary technology, domain names and other intellectual property rights are valuable assets that are critical to our success. We principally rely on trademarks (including by applying to register our trademarks in respect of key jurisdictions based on our business assessment) and confidentiality agreements to protect our intellectual property rights. We have a portfolio of registered trademarks in Türkiye in respect of many of our core brands, such as our “hepsiburada,” “hepsipay,” “hepsijet,” “hepsifinans” and “hepsiglobal” brands. However, we may in some circumstances be unable to (or may be delayed in our ability to) apply for or register our trademarks (including where third parties allege pre-existing rights or have made earlier applications) or acquire our desired domain names or prevent third parties from acquiring trademarks or domain names that are identical or similar to, infringe or diminish the value of our trademarks and other proprietary rights. There is also a risk that third parties will claim that our products, trademarks or brands infringe their intellectual property rights — for instance, if a third-party claims that it has obtained prior rights or a pre-existing trademark application or registration for an identical or similar trademark. These third parties may bring infringement claims against us or may oppose the registration and protection of our brands and/or trademark rights.
These risks are further exacerbated by our growth and the expansion of our business into new geographies. For example, in 2024 and 2025, we were involved in two lawsuits filed in the United States due to alleged infringements of trademarks by products listed in our “Hepsiburada Collections” store on the Walmart platform. While we are able to settle these matters with de minimis payments, we may be subject to other unrelated infringements claims in the future that could have a material adverse impact on our business, financial condition and results of operations.
If we are unable to prevent third parties from acquiring trademarks or domain names that are identical or similar to ours or that infringe or diminish the value of our brands, trademarks and/or other proprietary rights, or if we are not able to defend our brands and/or trademarks from infringement claims or from oppositions to registration, our market recognition may be diluted, third parties may be free to use our brands and/or trademarks in respect of the same or similar goods or services, our expansion into new markets could be stifled and our business, financial conditions, customer relationships, reputation and results of operation could be adversely affected.
We are not always able to discover or determine the extent of any unauthorized use of our proprietary rights. Actions taken by third parties that license our proprietary rights may materially diminish the value of our proprietary rights or reputation. The protection of our intellectual property may require the expenditure of significant financial and managerial resources. Moreover, the steps we take to protect our intellectual property may be unsuccessful, and may not always adequately protect our rights or prevent third parties from infringing or misappropriating our proprietary rights. We also cannot be certain that others will not independently develop or otherwise acquire equivalent or superior technology or other intellectual property rights.
The validity, application, enforceability and scope of protection of intellectual property rights for many internet-related activities, such as internet commercial methods patents, are uncertain and still evolving, which may make it more difficult for us to protect our intellectual property, and our business, prospects, financial condition and results of operations could be adversely affected.
In connection with our technological operations, we may be subject to intellectual property infringement claims brought against us by others, which are costly to defend and could result in significant damage awards.
We rely, to some extent, on third-party intellectual property, such as licenses to use software to operate our business and certain other copyrighted works. Due to the nature of our business operations, we may from time to time be subject to claims and legal proceedings regarding alleged infringement by us of the intellectual property of third parties. We also expect to be exposed to a greater risk of being subject to such claims in light of growing competition in the market. A number of internet, technology, media and patent-holding companies own or are actively developing patents covering e-commerce and other internet-related technologies, as well as a variety of online business models and methods. We believe that these parties will continue to take steps to protect these technologies, including, but not limited to, seeking patent protection in certain jurisdictions. As a result, disputes regarding the ownership of technologies and rights associated with e-commerce and other online activities are likely to arise in the future. In addition, we use certain open source code, and the use of open source code is often subject to compliance with certain license terms, which we may inadvertently breach. See “—We may use open source code in a manner that could be harmful to our business.”
45
Table of Contents
Although our employees are instructed to avoid acts that would infringe the intellectual property of others, we cannot be certain that our products, services and brand identifiers do not or will not infringe on valid patents, trademarks, copyrights or other intellectual property rights held by third parties. We may incur substantial expenses in responding to and defending against infringement claims, regardless of their veracity. Such diversion of management time and expenses, and the potential liability associated with any lawsuit, may cause significant harm to our business, prospects, financial condition and operations. A successful infringement claim against us could result in significant monetary liability, such as being liable for license fees, royalty payments, lost profits or other damages, or material disruption of our business. Similarly, the owner of the intellectual property may obtain injunctive relief to prevent us from making further use of certain technology, software or brand identifiers. If the amount of such payments is significant or if we are prevented from incorporating certain technology or software into our products or services or using our brand identifiers without hindrance, our business, prospects, financial condition and results of operations could be materially and adversely affected.
We have been and in the future may be involved in litigation, some of which could be material.
We have been and in the future may be involved in litigation relating principally to contract disputes, employment, consumer, intellectual property, tax, securities law and other matters in the ordinary course of our business, which have also included legal proceedings initiated by employees of third-party subcontractors, such as employment-related claims arising out of termination of our relationship with their employer. As our business expands, we may face an increasing number of such claims or claims relating to product liability, including those involving high amounts of damages. The development and use of innovative technologies in our business, including those based on machine learning and AI, may also expose us to an increased risk of litigation. See “Risks Relating to Our Business and Industry—We may fail to maintain or improve our technology infrastructure, or adopt and apply technological advances, including, but not limited to, generative AI, which could materially and adversely affect our business, results of operations and financial condition, and the use of new technologies may expose us to increased risks.”
As we became a publicly listed company with a higher profile and as our public profile may continue to grow in the future through any expansion of our cross-border business by HepsiGlobal, we may face additional exposure to claims and lawsuits inside and outside Türkiye. For example, in September 2021 and October 2021, alleged holders of our ADSs filed class action lawsuits in the state and federal courts of the State of New York, respectively. After negotiations, the parties signed a stipulation of settlement agreement with no admission of liability in March 2023, which was approved by the federal court at a fairness hearing held in August 2023 and pursuant to which the state court action was dismissed with prejudice in September 2023. Pursuant to the settlement, Hepsiburada paid $13.9 million to resolve both actions in their entirety.
We may also initiate proceedings from time to time. For example, we initiated litigation for annulment of the Turkish Capital Markets Board (the “TCMB”) decision regarding a fee imposed by the TCMB on the Company. Following the IPO of the Company on the Nasdaq Stock Exchange, the TCMB imposed a “board registration fee” amounting to over TRY 60.1 million, including interest accruing on this fee, attorney’s fees and the costs of the proceedings. The TCMB fee was calculated based upon the shares sold in our IPO, including the shares sold by TurkCommerce B.V. Although the Company appealed the decision all the way up to the Council of State over the course of 2023 and early 2024, the appeal was rejected on May 14, 2024 and the decision was finalized. TRY 60.1 million was paid on August 28, 2024, and an updated issuance document was submitted on September 3, 2024, which the TCMB approved on September 16, 2024, acknowledging the payment.
In parallel with these proceedings, in 2023, after the TCMB notified Hepsiburada that the board registration fee should be paid in accordance with the calculation method determined by the TCMB, the Company objected to this “calculation method.” The objection was rejected by the TCMB, and a separate annulment action was initiated by the Company against this rejection decision. While the lower court dismissed the case, the regional administrative court accepted the Company’s appeal, overturned the lower court’s decision and ruled in favor of the Company, and the Company was notified of the decision on July 11, 2025; the decision is currently under appeal by the TCMB before the Council of State. Following the favorable regional administrative court decision, the Company requested a refund of the overpaid amount in respect of its own shares sold abroad in connection with its public offering, and the TCMB refunded TRY 37.7 million on September 16, 2025. If the pending appeal is resolved in favor of the TCMB, the TCMB may request reimbursement of the refunded amount together with accrued interest.
The outcome of any claims, investigations and proceedings is inherently uncertain, and regardless of the outcome, defending against these claims could be both costly and time-consuming, and could significantly divert the efforts and resources of our management and other personnel. An adverse determination in any such litigation or proceedings could result in damages as well as legal and other costs, limit our ability to conduct business or require us to change the manner in which we operate, which would have a material adverse effect on our business, prospects, financial condition, results of operations and cash flows.
46
Table of Contents
We may be impacted by fraudulent or unlawful activities of merchants, which could have a material adverse effect on our reputation and business and may result in civil or criminal liability.
Despite measures we have taken and continue to take, our e-commerce services remain susceptible to potentially illegal or improper uses, which could damage our reputation and subject us to liability. Our standard agreement with the merchants on our Marketplace provides for weekly payments to merchants rather than immediately after the sale of a product. Our standard form agreement with our merchants and suppliers provides that we will directly compensate a customer for the purchase price if a customer returns a product and the merchant or supplier must refund us the price of the returned product. These provisions are designed to prevent merchants or suppliers from collecting payments, fraudulently or otherwise, in the event that a customer does not receive the products they ordered or when the products received are materially different from the merchant’s or supplier’s descriptions, to prevent merchants on our Marketplace from selling unlawful, counterfeit, pirated, or stolen goods, selling goods in an unlawful or unethical manner, and to prevent our merchants or suppliers from violating the proprietary rights of others or otherwise violating our product requirements. If our merchants or suppliers circumvent or otherwise fail to comply with these provisions, it could harm our business or damage our reputation.
While we have no liability for the content provided by third parties on our website under the E-Commerce Law or the related E-Commerce Regulation, we may face compensation claims, administrative fines or even criminal complaints if we become aware of unlawful or illegal content and do not take any action. We are deemed to be aware of unlawful or illegal content in circumstances such as if the content is determined as unlawful within the scope of a regulatory compliance report or notified to us by a judicial decision, the Turkish Ministry of Trade or other public institutions and organizations in Türkiye. We are also required to remove or restrict access to content constituting certain crimes under Article 8 of the Law on Internet Crimes, if we are notified of an order of the president of the Information and Communication Technologies Authority of Türkiye to this effect.
In addition, if we receive from the relevant rights holder a complaint of infringement of intellectual and industrial property rights that complies with the requirements of Article 12 of the E-Commerce Regulation, we are required to remove products from our platform within 48 hours and inform the rights holder and the seller of the product accordingly. If we receive an objection from the seller that complies with the requirements of Article 13 of the E-Commerce Regulation, pursuant to Article 14 of the E-Commerce Regulation we are required to re-publish the product within 24 hours and inform the rights holder and the seller; provided that it can be clearly understood from the documents and information submitted by the seller that the objection is justified. Pursuant to Article 14 of the E-Commerce Regulation, our examination is limited with the information and documents obtained from the seller and we are not required to conduct a separate investigation to determine the ownership of relevant intellectual and industrial rights. We are also not required to process complaints regarding the same product and claim unless the rights holder submits new documents proving the infringement of intellectual and industrial property rights. Failure to comply with these provisions will result in an administrative penalty of TRY 28,620 to TRY 286,206 for each violation for the year 2026. For more information on the E-Commerce Regulation, related provisions and our compliance policies, see Item 4.B “Information on the Company—Business Overview—Regulatory Overview.”
We may be subject to product liability claims when people or property are harmed or damaged by the products that are sold on our platform.
We are exposed to product liability or food safety claims relating to personal injury or illness, death or environmental or property damage caused by the products that are sold by us or through our Marketplace or through our strategic assets, and we do not maintain any insurance with respect to such product liability. As the products offered by us or through our Marketplace are manufactured by third parties, we have only limited control over the quality of these products. In addition, we cannot always effectively prevent our merchants from selling harmful or defective products on our Marketplace, which could cause death, disease or injury to our customers or damage their property. We may be seen as having facilitated the sale of such products and may be forced to recall such products. Under our Direct Sales model, where we act directly as seller, we may also have to recall harmful products.
Although we require that our merchants only offer products that comply with the existing product safety rules and monitor such compliance, we may not be able to detect, enforce or collect sufficient damages for breaches of such agreements. In addition, any negative publicity resulting from product recalls or the assertion that we sold defective products could damage our brand and reputation. Any material product liability, food safety or other claim could have an adverse effect on our business, prospects, results of operations, financial condition and cash flows.
47
Table of Contents
We have identified material weaknesses in our internal control over financial reporting and have as a result determined that our disclosure controls and procedures were not effective. If we remain unable to remediate identified material weaknesses, or if we have additional material weaknesses in the future, or otherwise fail to implement and maintain effective internal control over financial reporting, we may be unable to accurately report our results of operations, meet our reporting obligations or prevent fraud, and investor confidence in our company and the market price of our ADSs may decline.
Pursuant to SEC rules, our management must report on the effectiveness of our disclosure controls and procedures. Additionally, under Section 404 of the Sarbanes-Oxley Act of 2002, as amended (the “Sarbanes-Oxley Act”), our management is required to report on the effectiveness of our internal control over financial reporting at the end of each fiscal year. Furthermore, we are required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act. Even if our management concludes that our internal control over financial reporting is effective, our auditor may decline to attest to our management’s assessment or may issue an adverse opinion if it is not satisfied with our controls or the level at which our controls are documented, designed, operated or reviewed, or if it interprets the relevant requirements differently from us.
In prior fiscal years as well as the fiscal year ended December 31, 2025, our assessment has revealed material weaknesses in our internal controls that render our internal control over financial reporting ineffective. For example, from 2022 to 2024, we identified deficiencies in our internal control over financial reporting related to the design and operating effectiveness of information technology general controls (“ITGCs”) for information systems that in the aggregate constituted material weaknesses. Management concluded that the previously identified ITGCs material weaknesses had been remediated as of December 31, 2025
In addition, as of December 31, 2024, we identified deficiencies in the control environment, information and communication, control activities and monitoring components of the COSO Framework (as defined herein) that constituted material weaknesses, either individually or in the aggregate and, as part of our management’s assessment of its internal control over financial reporting for the fiscal year ended December 31, 2025, management identified material weaknesses in the control environment, information and communication, control activities and monitoring components of the COSO Framework.
There is no guarantee that we will be able to remediate identified material weaknesses or that additional material weaknesses will not be identified in the future. Additionally, we have incurred and expect to continue to incur additional expenses, and we have spent and expect to continue to spend significant management time, in complying with testing requirements and working to establish effective internal control over financial reporting. If we remain unable to remediate our material weaknesses in a timely manner, or if additional material weaknesses in our internal control over financial reporting are discovered, we may not be able to timely or accurately report our financial position, results of operations or cash flows or establish and maintain effective disclosure controls and procedures. Our failure to maintain an effective internal control environment could cause our consolidated financial statements to contain material misstatements, which could cause investors to lose confidence in our reported financial information. Investors’ loss of confidence in our reported financial information could in turn limit our access to capital markets, harm our results of operations, and lead to a reduction in the trading price of our ADSs. Additionally, ineffective internal control over financial reporting could expose us to increased risk of fraud or misuse of corporate assets and subject us to potential Nasdaq listing violations, regulatory investigations and civil or criminal sanctions. See Item 15. “Controls and Procedures.”
The requirements of being a public company will continue to require significant resources and management attention, which could make it difficult to manage our business.
As a public company with ADSs traded on an exchange located in the United States, we are subject to the reporting requirements of the Exchange Act and the Sarbanes-Oxley Act, the listing requirements of Nasdaq and other applicable securities rules and regulations. Compliance with these rules and regulations has increased and may continue to increase our legal, financial and other compliance costs and increase the demands on our legal, compliance and financial reporting personnel as well as our systems and other resources.
48
Table of Contents
The Exchange Act requires that we file annual reports with respect to our business, financial condition and results of operations. The Sarbanes-Oxley Act requires, among other things, an evaluation of and report on the effectiveness of the internal controls and procedures over our financial reporting established and maintained by management. Furthermore, establishing and maintaining the corporate infrastructure demanded of a public company may divert our management’s time and attention from implementing our growth strategy, which could prevent us from improving our business, financial condition and results of operations. We have made, and will continue to make, changes to our internal controls and procedures over our financial reporting and accounting systems to meet our reporting obligations as a public company. However, we have previously relied on and we continue to rely on outside experts and the measures we take may not be sufficient to satisfy our obligations as a public company. These obligations could have a material adverse effect on our business, financial condition, results of operations and cash flow.
As a public company with ADSs traded on an exchange located in the United States, we are subject to a broader scope of laws, regulations and standards, and therefore, potentially subject to a broader scope of fines, penalties and liability under U.S. securities laws. For example, in September 2021 and October 2021, holders of our ADSs filed class action lawsuits in the state and federal courts of the State of New York, respectively. The complaints alleged that the Company’s registration statement contained untrue statements of material facts or omitted to state facts necessary to make the statements made therein not misleading in violation of Sections 11, 12 and 15 of the Securities Act. After negotiations, the parties signed a stipulation of settlement agreement with no admission of liability in March 2023 which was approved by the federal court at a fairness hearing held in August 2023 subsequent to which the state court action was also dismissed with prejudice in September 2023. Pursuant to the settlement, Hepsiburada paid $13.9 million to resolve both actions in their entirety. We may, in the future, be named as a defendant in other legal actions, which could result in material costs and expenses.
In addition, changes in laws, regulations and standards relating to corporate governance and public disclosure create uncertainty for public companies, increase legal and financial compliance costs and make some activities more time-consuming. For example, as a public company, these rules and regulations make it more expensive for us to maintain insurance, such as director and officer liability insurance, and we may be required to incur higher costs to obtain the same.
Since January 1, 2025, we no longer qualify as an “emerging growth company.” As a result, we are required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, with respect to the effectiveness of our internal control over financial reporting. We have incurred and will continue to incur additional expenses in connection with compliance with the requirements of Section 404 of the Sarbanes-Oxley Act and our management must devote additional time and effort to implement and comply with such requirements. Moreover, even if our management concludes that our internal control over financial reporting is effective, our auditor may decline to attest to our management’s assessment or may issue an adverse opinion if it is not satisfied with our controls or the level at which our controls are documented, designed, operated or reviewed, or if it interprets the relevant requirements differently from us. In addition, in connection with the implementation of the necessary procedures and practices related to internal control over financial reporting, we have in the past identified and may in the future identify deficiencies that could result in non-compliance with the requirements of Section 404. Failure to comply with Section 404 could subject us to regulatory scrutiny and sanctions, impair our ability to raise revenue, cause investors to lose confidence in the accuracy and completeness of our financial reports and negatively affect the price of our ADSs. See “—We have identified material weaknesses in our internal control over financial reporting and have as a result determined that our disclosure controls and procedures were not effective. If we remain unable to remediate identified material weaknesses, or if we have additional material weaknesses in the future, or otherwise fail to implement and maintain effective internal control over financial reporting, we may be unable to accurately report our results of operations, meet our reporting obligations or prevent fraud, and investor confidence in our company and the market price of our ADSs may decline.”
Furthermore, on December 18, 2025, the Holding Foreign Insiders Accountable Act (the “HFIAA”) was signed into law. The HFIAA required our officers and directors to comply with the share ownership and transaction reporting obligations of paragraph (a) of Section 16 of the Exchange Act by March 18, 2026. Although filings are the responsibility of the individual directors and officers, we have dedicated significant resources to support them in meeting these new obligations, which has resulted in additional costs and put additional demands on our internal reporting personnel. Any additional disclosure or governance requirements imposed by U.S. legislative action or SEC rulemaking could further strain our resources and have an adverse impact on our results of operations and financial condition. See “—We may lose our foreign private issuer status in the future, which could result in significant additional costs and expenses.”
49
Table of Contents
We may be classified as a passive foreign investment company (“PFIC”), which could result in adverse U.S. federal income tax consequences to U.S. Holders of ADSs.
We will be classified as a passive foreign investment company, or PFIC, in any taxable year if either: (1) 50% or more of the fair market value of our gross assets (generally determined on the basis of a quarterly average) for the taxable year produce passive income or are held for the production of passive income or (2) 75% or more of our gross income for the taxable year is passive income. Based on the market price of our ADSs and the composition of our Group’s income, assets and operations, we do not believe we were a PFIC for the 2025 taxable year or expect to be treated as a PFIC for the current taxable year or in the foreseeable future. This is a factual determination, however, that depends on, among other things, the composition of the income and assets, and the market value of the assets, of us and our subsidiaries from time to time, and thus the determination can only be made annually after the close of each taxable year. Because the market value of the assets for the purposes of the asset test will generally be determined by reference to the aggregate value of our outstanding ADSs, our PFIC status will depend in large part on the market price of our ADSs, which may fluctuate significantly. Therefore, there can be no assurances that we will not be classified as a PFIC for the current taxable year or for any future taxable year.
If, contrary to our belief, we were characterized as a PFIC for any year, certain adverse U.S. federal income tax consequences could apply to a U.S. investor who holds ADSs with respect to any “excess distribution” received from us and any gain from a sale or other disposition of ADSs, and U.S. investors also may be subject to additional reporting obligations with respect to ADSs. In such case, we do not intend to provide the information necessary for a U.S. investor to make a qualified electing fund election with respect to the ADSs. See Item 10.E. “Additional Information—Taxation—Material U.S. Federal Income Tax Considerations for U.S. Holders—Passive Foreign Investment Company Rules.”
Risks Relating to Türkiye
We are subject to risks associated with doing business in an emerging market.
We mainly operate in Türkiye and derive substantially all of our revenue from activities in Türkiye, which is an emerging market. As a result, our business, results of operations, financial condition and prospects are significantly affected by the overall level of economic activity and political stability in Türkiye. External events and financial turmoil in neighboring emerging markets could disrupt the business environment in Türkiye. Moreover, financial turmoil in one or more emerging market(s) tends to adversely affect prices for securities in other emerging market countries. An increase in the perceived risks associated with investing in emerging economies could dampen capital flows to Türkiye and adversely affect the Turkish economy. Investors’ interest in Türkiye might be negatively affected by events in other emerging markets or the global economy in general, which could adversely affect the value of our business and/or stock price could have a material adverse effect on our business, financial condition, results of operations, cash flows and prospects.
Our headquarters and other operations and facilities are located in Türkiye and, therefore, our prospects, business, financial condition and results of operations may be adversely affected by political or economic instability in Türkiye.
Substantially all of our revenue is derived from our operations in Türkiye. Accordingly, political uncertainty, instability and economic conditions in Türkiye may directly affect our business. For example, in March 2025, the arrest of the mayor of Istanbul triggered protests across Türkiye. Some customers conducted politically driven boycotts in the aftermath of these events, whereby they no longer purchased merchandise from certain merchants, or decreased their use of e-commerce in general and, due to the sensitivities surrounding the boycotts, marketing activities were significantly scaled back, which amplified the deterioration in consumer demand. Additionally, in September 2025, Istanbul was the center of major anti-government protests and the police set up a blockade in the city. The police blockade coincided with bandwidth throttling that briefly limited internet speeds. While we did not record any material adverse effect on our business, financial condition, results of operations and cash flows as a result of such actions in 2025, any future similar throttling action could cause a material temporary decline in the demand on our platform and in the number of orders received, depending on the duration and extent of such actions.
50
Table of Contents
Political turmoil may also have an indirect adverse impact on our business. For example, the political protests and general unrest that followed the March arrests weakened the Turkish Lira, prompting the CBRT to sell foreign currency reserves and increase interest rates to curb further depreciation. Currency depreciation may have an adverse impact on our results of operations and financial condition, and higher interest rates may adversely affect our ability to fund our business operations. See “—Foreign exchange rate risks could affect the Turkish macroeconomic environment, could affect your investment and could significantly affect our results of operations and financial position in future periods if hedging tools are not available at commercially reasonable terms” and “—Risks Relating to Our Business and Industry—We may need to raise additional funds to finance our future capital needs, including investing in growth and technology, which may prevent us from growing our business.”
Political matters have affected and may continue to affect certain investors’ perception of Türkiye and the attractiveness of the Turkish economy from time to time. Should the civil unrest and shopping boycotts described above persist and worsen, or should any new developments that are considered to contribute to instability in Türkiye emerge, the value of our ADSs could decline.
As a result of a trend of inflation in Türkiye, the Turkish economy is treated as hyperinflationary, which may adversely affect our business, financial condition, results of operations, cash flows and the value of our ADSs.
Inflationary pressures affect our business and financial performance. The Turkish economy has experienced significant inflationary pressures with year-over-year consumer price inflation rates rising as high as 69.7% in the late 1990s and early 2000s. While inflation decreased during the 2010s, the Turkish economy saw a rapid surge in inflation beginning in 2022 and continuing through the first half of 2024 due to numerous factors. From the second half of 2024 through 2025 inflation has progressively decreased, though it remains high. The annual consumer price index (“CPI”) increased by 30.9%, 44.4% and 64.8% in 2025, 2024 and 2023, respectively, as published by Turkstat. Additionally, developments in the USD/TRY and global commodity prices materially impact the inflation outlook. As a result, the course of global economic activity, geopolitical developments and the impact of climate conditions on commodity prices must be closely monitored to understand and anticipate inflation developments in Türkiye. In the Inflation Report published in November 2025, the CBRT made an inflation forecast for the end of 2026 of 16%, with a target range of 13% to 19%. According to the results of the CBRT’s Market Participants Survey dated January 2026, the markets’ inflation expectation for the end of 2026 was 23.2%.
In the event of continued or rising inflation, we may not be able to and/or our merchants may not be able to adjust the prices we charge our customers to offset the effects of inflation on our cost structure. These factors negatively affected our margins in 2023, 2024 and 2025 and may continue to negatively affect our margins in the future. Inflation and government measures to combat inflation that impact macroeconomic stability in Türkiye have also affected and may continue to affect supply as well as general demand for our products and services. Inflation adversely impacts consumer behavior and leads to further reductions in purchasing power of our users, consumer confidence and consumer spending, therefore impacting our order growth. This may have a material adverse effect on our business, financial condition, results of operations and cash flows. For example, during 2023, 2024 and 2025, we observed the impact of inflation in the increased average price of products on our platform. We have also observed that pressure on consumer spending has caused a tendency for customers to substitute products with more affordable alternatives (i.e., towards lower-priced brands, regardless of whether sales are of essentials or non-essentials) and postponement of purchase decisions for certain categories of products. Although the consumer confidence index (seasonal and calendar adjusted) in Türkiye increased by 2.2 points from 81.3 in December 2024 to 83.5 in December 2025 (and remained at levels around 83.7 and 85.7 during January 2026 and February 2026), any number below 100.0 indicates a pessimistic outlook.
In addition, the continued rise in inflation has increased and could continue to increase our costs of operation, particularly in cost of inventory, payroll expenses and delivery costs, which has put and is expected to continue to put pressure on our cash requirements. We may not be able to keep wages and salaries at attractive levels in order to retain talent. Additionally, we or our merchants may consider offering higher customer discounts to stimulate customer demand in response to a slowdown, which could have an adverse impact on our GMV growth rate and our Gross Contribution. These factors may require us to obtain additional funding from sources other than our operations to meet our working capital needs or could otherwise negatively affect our business, financial condition and results of operations.
51
Table of Contents
Geopolitical or other developments can worsen inflation. For example, if the Iran war that began in February 2026 leads to a protracted increase in oil prices, it may push up inflation due to, among other things, higher energy and transportation costs. If the high inflation environment worsens or if new economic developments arise that have a similar effect, the resulting impact on consumer behavior and on our expenses may have a worsening adverse effect on our order growth, GMV growth, revenue, profitability and financial position, which may culminate in negative real GMV growth in future periods. See Item 5 “Operating and Financial Review and Prospects—Key Factors Affecting Our Financial Condition and Results of Operations—Inflation and Hyperinflation.”
At the same time, the compound effects of an increasingly orthodox monetary policy from the Turkish government in response to inflation and other factors have curtailed and may continue to curtail consumer demand, which has had and is expected to continue to have an adverse effect on our order growth. For example, we believe that in 2025 our results were adversely impacted, among other things, by the decelerating market that arose from counter-inflationary policies adopted by the Turkish government and the consequential decline in consumer purchasing power.
Following the categorization of Türkiye as a country with a three-year cumulative inflation rate greater than 100% in March 2022 by the International Practices Task Force of the Centre for Audit Quality, Türkiye has been considered as a hyperinflationary economy pursuant to IFRS rules (IAS 29 Financial Reporting in Hyperinflationary Economies), requiring companies in Türkiye reporting under IFRS Accounting Standards as issued by the IASB, including us, to apply IAS 29 to their financial statements for periods ending on and after June 30, 2022. As a result, we had to allocate additional resources to the preparation of our IFRS Accounting Standards as issued by the IASB financials, which resulted in additional associated expenses in 2022 and in the years since. As of 2025, Türkiye continued to be classified as a hyperinflationary economy for IFRS Accounting Standards as issued by the IASB reporting purposes, and the application of IAS 29 continues to be required for 2025. Our financial statements following the application of IAS 29 and related adjustments are no longer directly comparable to our historical financial statements. This may have created, and may continue to create, a challenge for investors and security analysts who look at our past performance to analyze and make forecasts about our future performance, including with respect to comparisons of current and historical margins. Therefore, investors and security analysts would require additional detailed information about our business plan and our macroeconomic assumptions in order to make their own projections for the Company. We cannot guarantee that we will be disclosing such detailed information in relation to our business plans or macroeconomic assumptions. Even if we do so, we cannot predict whether our investors or security analysts will be able to or willing to make their own projections about our Company. See “—Risks Relating to Ownership of our ADSs—If securities or industry analysts do not publish research or reports or publish unfavorable research about our business, or we fail to meet the expectations of industry analysts, the price of our ADSs and trading volume could decline.”
Türkiye’s economy has been facing risks related to its current account deficit, which could have a material adverse effect on our business, financial condition, results of operations and cash flows.
Macroeconomic developments in Türkiye, including those related to Türkiye’s net trade and current account deficit, affect our business and financial performance.
Türkiye’s volatile current account deficit may reflect both Türkiye’s long-standing structural economic problems and current economic and market conditions. Structural economic problems include dependence on imported energy and a high proportion of imports for manufacturing and domestic consumption and a low savings rate. To date, Türkiye’s current account deficit has been funded largely through short-term foreign capital borrowings and foreign portfolio investments. Increased uncertainty in the global financial markets could make it more difficult for Türkiye to finance its current account deficit, leading to increased volatility in the Turkish economy, which could have a material adverse effect on our business, financial condition, results of operations and cash flows.
52
Table of Contents
The effects of earthquakes in Türkiye may adversely affect our prospects, business, financial condition and results of operations.
Earthquakes have in the past adversely impacted, and may again in the future adversely impact, the Turkish economy and the business environment in Türkiye. For example, in January 2024, the Minister of Treasury and Finance stated that the expenses related to two earthquakes that occurred in February 2023 and affected approximately 14 million people in the southeastern region represented 3.7% of the GDP of Türkiye in 2023. More generally, Türkiye has been the site of devastating earthquakes in the past and may again be hit by serious earthquakes in the future. The country is covered by numerous fault lines, including the North Anatolian Fault extending from eastern Türkiye across northern Türkiye and into the Aegean Sea for a length of 1,200−1,500 kilometers and the East Anatolian Fault extending from eastern Türkiye to south of the country. The fault lines covering the country may trigger future earthquakes in the country. In particular, the Marmara-Istanbul region faces a high level of seismic risk, with recent studies indicating the potential for an earthquake exceeding 7.4 on the Richter scale. These possible earthquakes may have severe impacts on the Turkish economy, which may adversely affect our business, financial condition, results of operations, cash flows and prospects. In 2023, given the size of the earthquake zone, the death toll, the number of displaced people and the resulting decrease in consumers’ discretionary shopping, we suffered a decline in customer demand on our platform during the first quarter of the year, a negative impact on our customer numbers and a temporary disruption in our delivery services to and around the region. Similar or worse impacts on our business could arise in the event of future earthquakes.
Considering Istanbul’s large population and economic importance for Türkiye, any major earthquake near Istanbul may cause substantial economic damage which may adversely affect our business, financial condition, results of our operations, cash flows and prospects. Most of our headquarters and offices are located in Istanbul, and one of our fulfillment centers, which also includes an office building, is located in Gebze, a district of Kocaeli situated very close to Istanbul. Such an earthquake near Istanbul could therefore have a material adverse impact our business and results of our operations.
We are exposed to the risk of inadvertently violating anti-corruption, anti-money laundering, anti-terrorist financing and economic sanctions laws and regulations and other similar laws and regulations.
We have policies and procedures designed to assist with compliance with applicable laws and regulations in Türkiye, and as a foreign private issuer listed on a U.S. stock exchange, we may be subject to U.S. anti-money laundering and anti-terrorist financing laws and regulations, including the U.S. Bank Secrecy Act of 1970, the U.S. Money Laundering Control Act of 1986, and the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, and U.S. anti-bribery and anti-corruption laws and regulations, including the U.S. Foreign Corrupt Practices Act of 1977 (the “FCPA”). The FCPA prohibits providing, offering, promising or authorizing, directly or indirectly, anything of value to government officials, political parties or political candidates for the purposes of obtaining or retaining business or securing any improper business advantage. In addition, our operations may be subject to economic sanctions laws and regulations imposed by the United States, the EU, the United Kingdom or any other relevant jurisdiction. Such laws and regulations may prohibit transactions in, with, involving or relating to certain countries or regions or certain persons or entities. For example, starting in February 2022, the United States and a number of other countries around the world have been imposing sanctions and export controls against Russia over its invasion of Ukraine including regional trade bans, designations of entities (including Russian banks and state-owned entities) and individuals as Specially Designated Nationals and Blocked Parties, and restrictions on access by Russia to financial systems.
Further, we are subject to reviews, audits and supervisory activities conducted by MASAK and to the applicable regulatory requirements. See “—We are subject to laws and government regulations applicable to payment services and consumer finance businesses, and changes to these laws or any actual or perceived failure by us to comply with such laws and regulations could materially and adversely affect our business.” Such audits and investigations may result in additional administrative sanctions, financial liabilities or compliance obligations. Furthermore, any changes in anti-money laundering, anti-terrorist financing and similar regulations or in the interpretation and implementation of such regulations, or any actual or perceived failure by us to comply with such regulations, could materially and adversely affect our business, financial condition, results of operations, cash flows and compliance framework, which may cause our reputation, financial condition and results of operations to be materially and adversely affected.
53
Table of Contents
We maintain internal compliance policies and procedures, but we cannot provide any assurance that these policies and procedures will be complied with or that they will prevent all violations of the applicable laws and regulations and every instance of fraud, abuse, money laundering, terrorist financing, bribery and corruption. We also cannot provide any assurance that potential violations of our internal compliance procedures will be uncovered through our procedures or that violations of the applicable anti-bribery or money laundering, anti-terrorist financing and economic sanctions laws and regulations will not occur. We have internal audit, security and other procedures in place, which are designed to prevent instances of fraud, abuse, money laundering, terrorist financing, bribery and corruption. However, despite these controls and procedures, there can be no assurance that through these and other procedures we use we will timely and effectively catch any violations of our internal compliance procedures or any violations of laws and regulations, including those related to fraud, money laundering, terrorist financing, bribery, corruption and economic sanctions. Moreover, we may still be exposed to potential civil or criminal penalties or associated investigations under the relevant applicable laws and regulations, which may, if not successfully avoided or defended, have an adverse impact on our business, prospects, financial condition or results of operations. Similarly, actual findings or mere allegations of such violations could negatively impact our reputation and limit our future business opportunities, which may cause our reputation, financial condition and results of operations to be materially and adversely affected.
Foreign exchange rate risks could affect the Turkish macroeconomic environment, could affect your investment and could significantly affect our results of operations and financial position in future periods if hedging tools are not available at commercially reasonable terms.
We are exposed to foreign exchange rate risks between Turkish Lira, U.S. dollars and Euros. Although our income, expenses, assets and liabilities are primarily denominated in Turkish Lira, we also maintain some non-Turkish Lira-denominated assets and liabilities, primarily in U.S. dollars. As of December 31, 2025, 2024 and 2023, we maintained Turkish Lira equivalent assets in U.S. dollars of TRY 2,786.1 million, TRY 3,879.3 million and TRY 11,594 million, respectively, primarily consisting of cash, cash equivalents and financial investments. As of the same dates, we maintained Turkish Lira equivalent liabilities in U.S. dollars of TRY 2,913.4 million, TRY 1,858.9 million and TRY 2,429.1 million, respectively, primarily consisting of trade payables, payables to merchants and due to related parties. The variety of currencies that we work with may increase if and when HepsiGlobal expands its cross-border operations.
As of December 31, 2025, if the U.S. dollar had strengthened or weakened by 10% against the Turkish Lira, with all other variables held constant, our income/(loss) before income taxes would have been TRY 12.7 million lower or higher, mainly as a result of foreign exchange gains or losses on the translation of U.S. dollar assets and liabilities. We do not currently undertake any currency hedging to manage our exposure in Türkiye to changes in foreign exchange rates. Consequently, any sudden and significant changes in foreign exchange rates may have an adverse impact on our financial condition, revenue and results of operations.
Because we are incorporated in Türkiye, and because we are subject to Turkish accounting rules, we are bound to calculate and declare dividends, if any, in Turkish Lira, which will then be payable in U.S. dollars to the holders of ADSs. The depreciation of Turkish Lira against the U.S. dollar could cause fewer U.S. dollars to be obtained from the conversion of Turkish Lira at any time dividend payments are made to ADS holders.
According to the Central Bank, the Turkish Lira depreciated by 21.8% against the U.S. dollar in 2025, 19.7% in 2024 and 57.4% in 2023. Any further significant fluctuations in the value of the Turkish Lira relative to U.S. dollars could have a materially adverse effect on consumer demand, our business and results of operations.
Türkiye is subject to internal and external unrest and the threat of future terrorist acts, which may adversely affect us.
Türkiye is located in a region that has been subject to ongoing political and security concerns. Türkiye has been subject to a number of terrorist attacks, resulting in a number of fatalities and casualties. Such incidents have had, and could continue to have, a material adverse effect on the Turkish economy. This, in turn, could have a material adverse effect on our business, financial condition, results of operations, cash flows and prospects.
Türkiye has been subject to a number of bombings, including in tourist-focused centers in Istanbul and the city center in Ankara, including incidents in Ankara in October 2023 and in Istanbul in November 2022, which have resulted in a number of fatalities. Such incidents may continue to occur periodically. Such internal and external unrest and the threat of future terrorist acts may lead to reductions in purchasing power of our customers, consumer confidence, consumer spending, general demand for e-commerce goods and services, display advertising and marketing spending of our advertisers and, therefore, also a reduction in demand for our products and services, which would have a material adverse effect on our business, financial condition, results of operations and cash flows.
54
Table of Contents
Conflict and uncertainty in neighboring and nearby countries, as well as other regions with a geopolitical connection to Türkiye, may have a material adverse effect on the Company’s business, financial condition, results of operations or prospects.
Türkiye is located in a region that has been subject to ongoing political and security concerns. Political uncertainty in and tensions regarding certain neighboring and nearby countries has from time to time had an impact on the political and economic environment in Türkiye and may affect investors’ perceptions of the risks of investing in the securities of Turkish companies. Any material adverse impact on the Turkish economy or political stability as a result of deteriorations of Türkiye’s international relations, especially resulting from the events which affect Türkiye’s relationship with the countries or regions described below, could result in a reduction in the purchasing power of our customers, consumer confidence, consumer spending, general demand for e-commerce goods and services, display advertising and marketing spending of our advertisers and, therefore, also a reduction in demand for our products and services, which would have a material adverse effect on our business, financial condition, results of operations and cash flows.
Risks from events affecting Türkiye’s relationship with the countries in the Middle East.
The impact on Türkiye of political instability in the Middle East is exemplified by the internal conflict in the region. Türkiye has conducted a number of cross-border operations in Iraq and Syria targeting organizations deemed to be terrorist organizations in order to prevent terrorist activities against Türkiye.
The ongoing conflict in Syria has been the subject of significant international attention, and its impact and resolution are difficult to predict. In December 2024, an Islamist military and political party opposed to the Syrian government, Hayat Tahrir al-Sham (“HTS”), seized control of Syria from the prior ruler, Bashar al-Assad, who fled to Russia. Although HTS is designated as a terrorist organization by the EU, the United Nations, Türkiye and others, Türkiye has called for the designation to be removed. European leaders have sent delegations to the new government in Syria to seek to normalize relations, and the United States and the United Kingdom removed HTS from their respective lists of designated terrorist organizations in 2025. Regional tensions involving Syria continued in 2025. On April 9, 2025, Türkiye and Israel held a technical-level meeting in Azerbaijan to prevent unintended incidents in Syria, and on April 10, 2025, Turkish authorities condemned Israeli military actions in Syria as destabilizing. Türkiye continued military operations in Syria pursuant to parliamentary authorizations in effect until October 2025. Any escalation or further deterioration of the conflict could have a material adverse effect on Türkiye’s economy and regional stability, which could negatively impact our business and results of operations. As a result of the civil war in Syria, it is estimated that approximately four million Syrian refugees have fled from the country to Türkiye, only approximately 10% of whom had returned voluntarily as of September 2025. It remains unclear whether more refugees will return to Syria or if conditions in Syria will deteriorate.
Separately, on October 8, 2023, Israel formally declared war on Hamas in response to the coordinated attacks perpetrated by Hamas on October 7, 2023. On April 9, 2024, Türkiye restricted exports of a wide range of products to Israel until a ceasefire is declared in Gaza. On January 15, 2025, Israel and Hamas agreed on a ceasefire deal, which came into effect on January 19, 2025. However, the ceasefire lasted only two months, and Israel resumed its offensive in March 2025. On October 8, 2025, Israel and Hamas agreed to another ceasefire, which came into effect on October 10, 2025, and resulted in an exchange of all remaining living Israeli hostages by Hamas and approximately 2,000 of Palestinians held in Israeli prisons. Negotiations regarding an enduring resolution to the conflict are ongoing. Despite the formal ceasefire, hostilities in the region are continuing, threatening the stability of the deal. Given the number of parties involved, it is very difficult to predict the potential developments of these conflicts and their impacts on the geopolitical stability in the broader region, including Türkiye.
In addition to the Israel-Hamas conflict, developments involving Iran, including the conflict between Iran and Israel in June 2025, internal unrest in Iran and military hostilities involving Israel and the United States during the first quarter of 2026, have heightened geopolitical tensions and uncertainty across the Middle East. Iranian counterattacks during that period have affected infrastructure in certain Middle Eastern countries, including oil and gas facilities, and have disrupted air and maritime transportation in the region. According to separate statements by Türkiye’s Ministry of National Defense, one ballistic missile launched from Iran was detected as heading toward Turkish airspace, and two additional ballistic missiles launched from Iran entered Turkish airspace; in each case, the threat was intercepted and neutralized by NATO air and missile defense assets. The situation remains highly volatile and uncertain, and it is difficult to predict the impact of these developments on Türkiye and on the Company. These developments have contributed to increased volatility in global energy markets, particularly in light of Iran’s proximity to the Strait of Hormuz, a critical shipping lane for crude oil and liquefied natural gas. Notably, the price of Brent crude has swung from approximately US$70 to almost US$120 per barrel. A protracted increase in oil prices as a result of these or other developments would increase our operating expenses due to the direct impact on delivery costs. It could also adversely affect consumer purchasing power, particularly if it pushes up inflation. These impacts, either individually or in the aggregate, could have a material adverse impact on our business, financial condition, cash flows and results of operations.
55
Table of Contents
Furthermore, ongoing regional security risks related to the evolving dynamics between Türkiye and the Kurdistan Workers’ Party (“PKK”) have adversely affected, and may continue to affect in the future, the relationship between Türkiye and the countries in the Middle East. In May 2025, the PKK announced it would disband and disarm, and on October 26, 2025, it began withdrawing its armed forces from Türkiye to northern Iraq. Although the PKK’s announcement, by itself, is not expected to have a material impact on the Company’s operations, the regional security and geopolitical landscape remains fluid. The durability and downstream consequences of these steps remain uncertain as of the date of this report, and the risk of possible spillovers in Iraq or Syria or renewed hostilities at the border areas cannot be excluded.
Although we do not have material direct or indirect business operations, interests or investments in Syria, Iraq, Iran, Israel or Palestine, it is not possible to predict the broader consequences of the ongoing conflicts. It is also not possible to predict any additional adverse effects on existing macroeconomic conditions, consumer spending habits, currency exchange rates and financial markets, all of which could adversely impact our business, financial condition and results of operations.
Risks from events affecting Türkiye’s relationship with Russia and Ukraine.
Russia has become one of Türkiye’s most important trading partners and is the largest supplier of natural gas to Türkiye. Tourism from Russia to Türkiye constitutes another important aspect of Türkiye’s relationship with Russia. Türkiye and Russia also cooperate in other industries, including tourism, the construction industry and the ongoing construction of the Akkuyu Nuclear Power Plant, the first stage of which was initially expected to be commissioned in 2025, but later was postponed to 2026. Türkiye also has important relations with Ukraine, a significant tourism and trading partner. In February 2022, Russia commenced a full-scale military invasion of Ukraine. Türkiye publicly opposed the Russian invasion and subsequently acted as a host to peace negotiations between Ukraine and Russia, and helped broker a deal between the two countries to allow maritime grain shipments from Ukraine. In July 2023, President Recep Tayyip Erdogan met with Volodymyr Zelensky, President of Ukraine, in İstanbul and he stated that Ukraine deserved to be in NATO. In September 2024, the Turkish President reiterated Türkiye’s steadfast support for Ukraine’s sovereignty and territorial integrity in a video message to the Fourth Crimea Platform Leaders Summit. In February 2025, Türkiye hosted the negotiations between Ukrainian and Russian negotiators and the U.S. delegation in Istanbul to address concerns regarding embassy operations, including banking access and staffing stability. Throughout 2025, further negotiations, which included third parties, such as the United States and the European Union, took place but no ceasefire was agreed. Even if a potential ceasefire agreement is ultimately agreed, there is no certainty that the conflict will not recur in the future. Türkiye’s position as a NATO member and a host to preliminary negotiations between Ukrainian and Russian negotiators may materially affect Türkiye’s global diplomatic position as well as its economic and financial condition.
Following the invasion of Ukraine, the United States, the EU, Canada, Japan and Australia have imposed sanctions on Russia, select Russian companies and select Russian nationals. Following these sanctions, thousands of Russians and Ukrainians fled to Türkiye to stay, invest and hold assets because Türkiye did not impose any sanctions on Russia except for the closure of the Bosporus and Dardanelles straits to warships. If Türkiye were to impose such sanctions, they may have a material adverse effect on Türkiye’s economy and financial condition due to Türkiye’s significant trade, natural gas supply and tourism relationships with Russia. Although sanctioning countries including the United States and the EU have not taken measures against Türkiye, they could do so, including if they determined that Türkiye supported Russia’s war efforts including, for example, by failing to impose sanctions on Russia, which could have a material adverse effect on Türkiye’s economy. Heightened tensions, if any, between Türkiye and Russia, or Ukraine, or the sanctioning countries such as the United States could materially negatively affect global macroeconomic conditions and the Turkish economy, which would have a material adverse effect on our business, financial condition, results of operations and cash flows.
Risks from events affecting Türkiye’s relationship with the EU.
Türkiye commenced negotiations on its accession to the EU on October 3, 2005, and expects to join the EU at some point in the future. The EU decided in 2006 to suspend negotiations with respect to eight out of 35 parts, or “chapters,” and not to “close” the other 27 chapters, of Türkiye’s accession negotiations because of Türkiye’s restrictions with respect to the Greek Cypriot Administration. During the EU General Affairs Council meeting of December 8, 2009, Greek Cypriots declared that “normalization” of relations is a precondition for progress in six chapters. As a result, 14 chapters have been blocked. On November 24, 2016, the European Parliament passed a non-binding resolution to suspend talks with Türkiye but the EU Foreign Ministers rejected the call by the European Parliament to freeze the accession process of Türkiye on December 13, 2016.
56
Table of Contents
On April 25, 2017, the Parliamentary Assembly of the Council of Europe reopened the political monitoring process against Türkiye, leading the European Parliament to call EU governments to suspend membership negotiations with Türkiye on March 13, 2019. On October 30, 2024, the European Commission published its 2024 country report on Türkiye, conveying criticism but stating that Türkiye remains a key partner and a candidate country for the EU, making reference to Türkiye’s improving relations with Greece and the increase in its trade volume with the EU, which led to it becoming the EU’s fifth largest trading partner in 2023. On November 4, 2025, the European Commission published its 2025 country report on Türkiye. As with the 2024 country report, the 2025 country report conveys criticism but states that Türkiye remains a key partner and a candidate country for the EU, making reference to continuing divergence from EU standards in democratic institutions but also to alignment with the function market economy criteria, sound macroeconomic policies and continued efforts in hosting refugees. Türkiye’s accession depends on a number of economic and political factors relating to both Türkiye and the EU. Although the shared objective of the negotiations is accession, these negotiations are an open-ended process, the outcome and timing of which cannot be guaranteed. Further delays or other adverse developments in Türkiye’s accession to the EU may have a negative effect on Türkiye’s economic performance and credit ratings and could have a material adverse effect on our business, financial condition, financial condition and/or results of operations.
Additionally, in recent years, several important natural gas reserves have been discovered in the eastern Mediterranean, where Türkiye has also been engaging in exploration activities.
The EU and Türkiye have supported conflicting claims to the gas in these waters. On November 11, 2019, the EU adopted a framework for imposing sanctions on individuals or entities responsible for, or involved in, drilling and exploration activities. In October 2020, both France and Greece asked the EU to consider suspending the bloc’s customs union agreement with Türkiye.
Any decision by the EU to abolish the customs union with Türkiye, end Türkiye’s EU accession bid or impose additional sanctions on Türkiye might cause a deterioration in the relationship between Türkiye and the EU, impede Türkiye’s access to EU funding and have a material adverse impact on Türkiye’s economy. These actions could also increase duties for cross-border sales and therefore increase the effective price of products imported from, or exported to, the EU, including products sold on our platform, such as those imported (or, once outbound services are launched, exported) through HepsiGlobal.
On July 28, 2023, the Company incorporated Hepsiburada Global B.V., a wholly owned subsidiary in the Netherlands, in line with Hepsiburada’s strategy to expand its operations into the EU. EU directives require entities incorporated in Europe to comply with the EU’s international sanctions rules. Although Hepsiburada currently uses its best efforts to comply with EU international sanctions as a best practice and as part of its contractual obligations, the fact that Hepsiburada has an EU-based subsidiary has subjected and will continue to subject Hepsiburada to European legal and compliance requirements and regulatory scrutiny.
Risks from events affecting Türkiye’s relationship with the United States.
The relationship between the United States and Türkiye has been strained by developments in the Turkish region, including developments involving Syria and Russia, and the United States has, from time to time, imposed or considered sanctions against Türkiye in connection with these developments. Notably, in October 2019, the United States issued an executive order imposing sanctions on certain Turkish government ministries and officials due to tensions relating to Türkiye’s military operations in Syria; however, the sanctions were lifted later that month, and in January 2025, then-United States President Joseph R. Biden amended the October 2019 executive order to remove specific references to the government of Türkiye. Additionally, the United States Congress has considered potential sanctions against Türkiye in response to Türkiye’s agreement to acquire an air and missile defense system from Russia in December 2017. In December 2020, the United States imposed sanctions that targeted the Presidency of Defense Industries (SSB) of Türkiye, its chairman and three other officials, which remain in place.
57
Table of Contents
Moreover, certain legal proceedings in the United States against Turkish individuals and entities may impact Türkiye’s relationship with the United States. For example, in 2018, a New York federal court found a former executive at Türkiye’s majority state-owned bank Türkiye Halk Bankası A.Ş. guilty on charges that included bank fraud and conspiracies to evade U.S. sanctions against Iran and sentenced him to prison. He was released in July 2019, but the U.S. Department of Justice brought similar allegations against Türkiye Halk Bankası A.Ş. After the matter moved through U.S. courts in the intervening years, on March 9, 2026, the United States and Türkiye Halk Bankası A.Ş. announced that they had agreed to resolve the prosecution through a deferred prosecution agreement. The agreement must still be approved by the United States District Court for the Southern District of New York. Until approved by the court, and as of the date of this annual report, the final outcome in relation to the judicial process, or whether any sanction, fine or penalty will be imposed by the Office of Foreign Assets Control (“OFAC”) or any other U.S. regulatory body on Türkiye Halk Bankası A.Ş. or any other Turkish bank or person in connection with those matters, as well as the possible reaction of the Turkish Government or the financial markets to any such events, is unknown. Developments such as these increase legal and regulatory uncertainty and may further strain diplomatic and financial relations between Türkiye and the United States.
Geopolitical risks, coupled with the volatility of the Turkish Lira and Türkiye’s reliance on foreign investment, present significant economic challenges, particularly as Türkiye’s growth prospects are closely tied to its economic and political relationship with the United States. It remains uncertain whether the U.S. Congress will advance or introduce new sanctions against Türkiye. Actual or perceived political instability in Türkiye, escalating diplomatic and political tensions with the United States or other countries and/or other political circumstances could have a material adverse effect on the Company’s business, financial condition or results of operations or on the market price of the ADSs.
Türkiye’s economy has been undergoing a significant transformation and remains subject to ongoing structural and macroeconomic risks.
Since the mid-1980s, the Turkish economy has moved from a highly protected state-directed system to a market-oriented free enterprise system. Reforms have, among other things, largely removed price controls and reduced subsidies, reduced the role of the public sector in the economy, emphasized growth in the industrial and service sectors, liberalized foreign trade, reduced tariffs, promoted export growth, eased capital transfer and exchange controls, encouraged foreign investment, strengthened the independence of the Central Bank, led to full convertibility of the Turkish Lira by accepting Article VIII of the International Monetary Fund’s (the “IMF”) Articles of Agreement and overhauled the tax system.
However, the Turkish economy has also experienced a succession of financial crises and severe macroeconomic imbalances. These include substantial budget deficits, significant current account deficits, high rates of inflation and high real rates of interest.
According to Turkstat, the annual rate of change in the consumer price index was at 30.9% in December 2025. (See “—As a result of a trend of inflation in Türkiye, the Turkish economy is treated as hyperinflationary, which may adversely affect our business, profitability, results of operations and the value of our ADSs”). Türkiye had a current account deficit of USD 30.1 billion in 2025, compared to USD 13.0 billion in 2024 and USD 41.8 billion in 2023. (See “—Türkiye’s economy has been facing risks related to its current account deficit, which could have a material adverse effect on our business and results of operations.”)
In March 2019, the United States announced that imports from Türkiye would no longer be eligible for tariff relief under the “Generalized System of Preferences” program, which seeks to promote economic growth in countries identified as developing countries. The United States cited Türkiye’s rapid economic development since its entry into the program and that it thus no longer qualified to benefit from these tariff preferences. Regulatory changes such as these reflect increasing challenges faced by some exporters, which might have a material adverse effect on Türkiye’s economy and/or the financial condition or one or more industries within Türkiye. In August 2025, a 15% reciprocal tariff rate was applied by the United States on imports from Türkiye, increasing the prior 10% baseline set earlier in 2025 as part of broad-based tariff measures affecting global trade. In February 2026, the U.S. Supreme Court ruled the 15% reciprocal tariff unlawful, and subsequently the United States applied a 10% universal tariff on imports from all countries under a different legal basis. The universal tariff is set to terminate on July 24, 2026. Although we do not expect current U.S. tariffs to have a significant impact on the Turkish economy, a future tightening of tariffs by the United States or other countries could have a significant adverse impact on Türkiye’s economy.
58
Table of Contents
The Turkish Treasury and Finance Minister announces GDP growth estimates and inflation rate with a three-year horizon on an annual basis. There can be no assurance that the targets indicated will be reached, that the Turkish government will continue to implement its current and proposed economic and fiscal policies successfully or that the economic growth achieved in recent years will continue considering external and internal circumstances, including the Central Bank’s efforts to curtail inflation and simplify monetary policy while maintaining a lower funding rate, the current account deficit and macroeconomic and political factors, such as changes in oil prices and uncertainty related to conflicts in Iraq and Syria (see “—Conflict and uncertainty in neighboring and nearby countries, as well as other regions with a geopolitical connection to Türkiye, may have a material adverse effect on the Company’s business, financial condition, results of operations or prospects”) and political developments in Türkiye (see “—Our headquarters and other operations and facilities are located in Türkiye and, therefore, our prospects, business, financial condition and results of operations may be adversely affected by political or economic instability in Türkiye”).
Any of these developments might cause Türkiye’s economy to experience macroeconomic imbalances, which might impair our business strategies and/or have a material adverse effect on our business, financial condition, cash flows and/or results of operations. Global macroeconomic shifts that adversely affect Türkiye’s economy may also have a material adverse impact on global share prices, including the price of our ADSs. For example, various announcements in April 2025 about tariffs to be imposed or lifted by the United States on all countries caused material volatility in global share values, which may adversely affect the price of our ADSs.
The compound effects of an increasingly orthodox monetary policy from the Turkish government in response to inflation and other factors have curtailed, and are expected to continue to curtail, consumer demand, which has had and is expected to continue to have an adverse effect on our order growth. This, in turn, may ultimately result in negative real GMV growth, which could have a material adverse effect on our business, results of operations, cash flows and financial condition. It could also have a material adverse effect on the price of our ADSs and weaken investor confidence in our longer-term prospects.
Türkiye may continue to be subject to sanctions pursuant to the U.S. Countering America’s Adversaries Through Sanctions Act (“CAATSA”), which may adversely affect our operations, financial condition or results of operations.
The U.S. government has imposed, and may in the future expand or modify, sanctions on Türkiye pursuant to CAATSA in connection with Türkiye’s acquisition of the S-400 air and missile defense system. These sanctions, as well as any additional measures that could be imposed, may restrict or prohibit certain transactions involving U.S. persons, financial institutions or technology, and could limit access to U.S. capital markets, financing arrangements or critical suppliers. Compliance with existing or future CAATSA-related restrictions may increase our operating costs, require changes to our supply chain, delay or prevent the execution of certain contracts and expose us to reputational harm or legal and regulatory risks. Although U.S. and Turkish officials have reportedly continued discussions in 2026 regarding defense cooperation and the potential resolution of issues related to Türkiye’s acquisition of the S-400 air and missile defense system, sanctions imposed under CAATSA remain in effect as of the date of this annual report. There can be no assurance that U.S.–Türkiye diplomatic discussions will result in the removal or relaxation of CAATSA sanctions, and any continuation or expansion of such sanctions could have a material adverse effect on our operations and financial performance.
Internet and e-commerce regulation in Türkiye is recent, has undergone changes since its inception and is subject to further development.
In 2007, Türkiye enacted a law setting forth obligations and liabilities of content, access and hosting providers, as well as certain requirements specific to online content (the “Internet Law”). A number of laws and regulations impacting e-commerce and digital businesses in Türkiye have been enacted since 2007, including amendments to the Internet Law, the E-Commerce Law (as defined under Item 4.B. “Information on the Company—Business Overview—Regulatory Overview”), various laws to protect personal data and laws on electronic payments, among others. However, unlike in the United States, little case law exists around the Internet Law and E-Commerce Law, and existing jurisprudence has not been consistent and may not reflect the latest amendments or additional legislation. Legal uncertainty arising from the limited guidance provided by current laws in force allows for different judges or courts to decide very similar claims in different ways and establish contradictory jurisprudence. This creates legal uncertainty and could set adverse precedents, which, individually or in the aggregate, could have a material adverse effect on our business, results of operations, cash flows and financial condition. In addition, legal uncertainty may negatively affect our customers’ perception and use of our services.
59
Table of Contents
In 2022, significant amendments were made to the E-Commerce Law, and the E-Commerce Regulation was adopted and further amended, which introduced new obligations for electronic commerce intermediary service providers and electronic commerce service providers, such as Hepsiburada, with the aim of preventing unfair competition, a harmful competitive environment and monopolistic commercial practices in the Turkish e-commerce market. We are required to comply with certain obligations set forth in the E-Commerce Law and the E-Commerce Regulation and may face administrative fines in case of any violations. See Item 4.B. “Information on the Company—Business Overview—Regulatory Overview.”
The E-Commerce Law and the E-Commerce Regulation provide for different obligations depending on the annual Net Transaction Volume (in nominal terms) and number of transactions pertaining to electronic commerce intermediary service providers and electronic commerce service providers. Depending on our annual Net Transaction Volume and number of transactions, the scope of our obligations under the E-Commerce Law and the E-Commerce Regulation may be subject to change, which may materially affect our business. Hepsiburada’s Net Transaction Volume is currently below the TRY 237,542.9 million threshold.
The provisions of the amendments to the E-Commerce Law and the E-Commerce Regulation introduced in 2022 that are most directly relevant to the Company include the following:
● limits on the total amount of advertising and marketing expenditures and customer discounts with the goal to prevent e-commerce platforms from gaining an asymmetric market share through excessive discounts and excessive marketing by using disproportionate economic power. We have not yet become subject to any restrictions with respect to advertisement and discount budgets because we have remained below the applicable threshold since inception (TRY 237,542.9 million in 2026). If our Net Transaction Volume exceeds the threshold for the relevant period and we become subject to advertisement and discount budget restrictions in the upcoming years, we may have to limit our advertisement and discount expenditures, which could directly or indirectly have an adverse impact on our business;
● restrictions on engaging in certain business operations, such as payments and financial services. The restrictions also limit specified listing activities within a platform and the provision of last-mile delivery services to third parties. Similarly to the above, we have not yet become subject to restrictions concerning the provision of payments and financial services and last-mile delivery services to third parties, as the restrictions apply only to companies whose Net Transaction Volume, as of 2026, exceeds TRY 475,085.8 million. It is expected that the applicable threshold will be adjusted every year, and our Net Transaction Volume will need to be assessed on an annual basis;
● a ban on the sale of private label products for all e-commerce companies on their own platforms. We have continued our private label business in the fashion category outside of Türkiye as part of our HepsiGlobal operations, which are not quantitatively material to the Company. We also sold our private label products through a dedicated brand website and on another marketplace in Türkiye. These channels were discontinued in August 2025;
● a prohibition on unfair commercial practices in electronic commerce. Examples of unfair commercial practices under the E-Commerce Law include failing to make payment to the seller within the time specified in the E-Commerce Law, forcing the seller to sell goods or services with special offers, failing to determine the conditions of the commercial relationship with the seller through an intermediation contract and/or making unilateral amendments to such contract to the detriment of the seller, charging a fee from the seller when no service is provided or the type of service provided and the amount/rate of the service fee is not specified in the intermediation contract and suspending or terminating the service provided to the seller in the absence of any objective criteria in the intermediation contract. In addition, Article 11(6) of the E-Commerce Regulation lists additional practices that would only constitute unfair commercial practices for large and very large-scale electronic commerce intermediary service providers (as defined in the E-Commerce Regulation). The E-Commerce Regulation was further amended to include additional unfair commercial practices, effective March 8, 2025. In the future, in case of further amendments to these provisions or emergence of certain common practices in the market as a result of application of these provisions or due to the decisions of judicial or regulatory authorities regarding these regulations or their interpretation, we may need to adjust our operations;
● a requirement to include mandatory elements of intermediation contracts concluded between electronic commerce intermediary service providers and electronic commerce service providers. The E-Commerce Regulation, as most recently amended effective March 8, 2025, provides for additional mandatory elements for the intermediation contracts of medium, large and very large-scale electronic commerce intermediary service providers (as defined in the E-Commerce Regulation);
60
Table of Contents
● an obligation for electronic commerce intermediary service providers operating in Türkiye whose Net Transaction Volume is over TRY 79,181.0 million in a calendar year and the number of transactions (excluding cancellations and returns) is over 100,000, to obtain and annually renew an e-commerce license upon payment of a license fee. The effective license fee will be calculated based on a graduated rate of a company’s Net Transaction Volume derived from within Türkiye for the prior calendar year, such that the effective license fee applied would be the sum of progressively higher proportions of the electronic commerce intermediary service provider’s Net Transaction Volume exceeding the thresholds specified in the E-Commerce Law. For example, where the Net Transaction Volume is between TRY 79,181.0 million and TRY 158,361.9 million, the license fee is calculated as the three per ten thousand of the amount exceeding TRY 79,181.0 million. In case Net Transaction Volume is between TRY 158,361.9 million and TRY 237,542.9 million, the license fee is the sum of the above amount, plus five per thousand of the part exceeding TRY 158,361.9 million.
Article 9 and Article 10 of the Law on Amendments to the Law on Consumer Protection and Certain Other Laws published on October 30, 2024 stipulates that certain specified sales and expenditures may be deducted from the Net Transaction Volume used as the basis for calculating license fees, up to a multiple of such amounts decreasing annually from four times in 2024 to three times in 2025 and to two times from 2026 onwards. To benefit from this provision, the Net Transaction Volume of the electronic commerce intermediary service providers must not exceed 20% of the electronic commerce volume calculated by the Turkish Ministry of Trade using data from the Electronic Commerce Information System (“ETBIS”). We are currently eligible to benefit from this provision.
This provision went into effect on January 1, 2025. We paid a license fee in the amount of TRY 211.2 million on March 25, 2026 and TRY 214.1 million on March 27, 2025. The license fee will materially increase if our Net Transaction Volume passes the threshold of TRY 237,542.9 million in a future year.
The amendments to the E-Commerce Regulation introduced in the regulation published in the Official Gazette on March 8, 2025, generally regulate the provisions regarding (i) the scope of information and verification obligations, (ii) unfair commercial practices for electronic commerce intermediary service providers, (iii) data processing obligations, (iv) exceptions to the total amount of advertising and discount budgets limits, (v) the mandatory elements of certain intermediation contracts, (vi) the independent audit and regulatory compliance reporting deadlines and (vii) sales abroad that will be deducted while calculating the license fee.
Any failure to comply with requirements under the E-Commerce Regulation that currently apply or that may apply in the future could subject us to fines, which could have a material adverse impact on our business, our results of operations, our financial condition and our reputation.
Under Article 4 of the Tax Procedure Law General Communiqué No. 538 published in the Official Gazette in May 2022, as a hosting service provider and intermediary service provider, we became subject to an obligation to provide continuous information to the Turkish Revenue Administration for tax purposes. This information may include web addresses where the service is provided, name, ID/tax number and workplace address of service receivers, amount and date of each collection or sale transaction and bank account information regarding payments made to service receivers. We may be subject to penalties under Tax Procedure Law if we fail to comply with this reporting obligation.
In the future, the Company may face more stringent restrictions and higher compliance costs if we grow at a faster pace, which could have a material adverse effect on our competitiveness and on our business, financial condition and/or results of operations. For more detail on regulatory changes, see Item 4.B. “Information on the Company—Business Overview—Regulatory Overview.”
61
Table of Contents
Risks Relating to Ownership of our ADSs
The Change of Control has resulted and may continue to result in changes to our strategy, organizational structure, senior management and other personnel, corporate governance, policies and procedures, business relationships and geopolitical exposure, which could have potential adverse impacts on our business and operations.
On October 17, 2024, our then-controlling shareholder, being Hanzade Vasfiye Doğan Boyner, our Founder, and Vuslat Doğan Sabancı, Yaşar Begümhan Doğan Faralyalı, Arzuhan Doğan Yalçındağ and Işıl Doğan (collectively, the “Selling Shareholders”), entered into a stock purchase agreement (the “Stock Purchase Agreement”) with Joint Stock Company Kaspi.kz (“Kaspi.kz”), a joint stock company incorporated under the laws of Kazakhstan, for all outstanding Class A shares and Class B shares of the Company held by the Selling Shareholders, corresponding to 65.41% of our share capital (the “Change of Control”). The Change of Control was subject to regulatory approvals of the Turkish Competition Board, the Banking Regulation and Supervision Agency, the Information Technologies and Communications Authority and the Central Bank of the Republic of Türkiye and was completed on January 29, 2025 (“Closing”), on which date Kaspi.kz became our new controlling shareholder. Following the Change of Control, in accordance with former Article 7/A of the Articles of Association, all outstanding Class A shares automatically converted into Class B shares, and the Class B shares were re-designated as “ordinary shares” effective from March 4, 2025.
The aggregate consideration payable by Kaspi.kz in connection with the Stock Purchase Agreement was approximately $1,127 million, payable in two tranches: a cash consideration of $600.0 million, which was paid at Closing, and a deferred cash consideration of $526.9 million, which was paid on July 28, 2025.
We may make further changes to our strategy, reporting practices, employee incentive programs, senior management, organizational structure or corporate governance. For example, in December 2025, we announced a plan for our current chief executive officer, Nilhan Onal, to step down from this role by July 1, 2026 after working with the Company to support an orderly transition. Moreover, we are updating certain of our reporting metrics to better align with those of our controlling shareholder. Further, in 2025, we have changed certain quarterly reporting practices, such as discontinuing our investor calls. Although, at the date of this annual report, we have not experienced any material adverse effects to our business and operations as a result of the Change of Control, it cannot be excluded that such effects may arise in the future. Further integration with Kaspi.kz may give rise to temporary inefficiencies, costs increases or loss of personnel and may require substantial time and focus from our management, which could negatively impact our ability to successfully manage our growth and expansion and have an adverse impact on the market price of our ADSs. Kaspi.kz may prioritize growth opportunities, synergies, operational efficiencies or cost-optimization measures, which may have negative impacts on our business and results of our operations. In addition, the market price of our ADSs may be adversely affected by a material decrease in the market price of Kaspi.kz’s own ADSs. See “—Risks Relating to Our Business and Industry—Our operating metrics and competitive information, both internally calculated and provided by third parties and included in this annual report, have changed and may in the future change from time to time, and may be calculated differently from the metrics or competitive information published by our competitors or other third parties in our industry and any perceived inaccuracies or inadequate cross-company comparisons may harm our reputation.”
Furthermore, as a result of the Change of Control, we are no longer controlled by domestic Turkish individuals, but rather by a company incorporated under the laws of Kazakhstan. Our new ownership structure in some cases has led, and may in the future continue to lead, to a reconfiguration of our relationship with local government authorities, regulators and other key stakeholders, and we no longer benefit from ties established between our Founder, her family and various third parties in the Turkish market.
Our new ownership structure may also result in increased scrutiny and a shift in public perception, which could pose additional risks for our operations and reputation. For example, the strength of the financial services operations of Kaspi.kz in Kazakhstan or Kaspi.kz’s potential acquisition of Rabobank Group’s Turkish subsidiary, subject to regulatory and contractual approvals, as announced by Kaspi.kz in March 2025, may weaken our relationships with current and potential partners in the Turkish financial services sector if they see us as a competitor, which could have an adverse impact on our business and our financial condition.
Moreover, our operations may be restricted by regulations on foreign investments. We may also be directly or indirectly impacted by changes in Kazakh law and policies. The foreign controlling ownership exposes us to increased geopolitical risks. These risks may arise from, for example, changes in trade policies, diplomatic tensions, political and financial instability in Kazakhstan or economic sanctions imposed by the Kazakh government or on Kazakh entities and individuals.
62
Table of Contents
Kaspi.kz controls the majority of our voting rights, and its interests might conflict with or differ from your interests as a shareholder.
Our controlling shareholder, Kaspi.kz, owns 85.66% of the Company’s ordinary shares, and thus can exercise control over the Company.
Under Turkish law, certain shareholder rights and obligations are triggered upon reaching specific ownership thresholds. As our controlling shareholder exceeds the 75% ownership threshold, it is able to approve all resolutions of the general assembly relating to (i) a complete change of the Company’s field of activity, (ii) the creation of privileged shares and (iii) restrictions on the transfer of registered shares. If our controlling shareholder were to increase its ownership to 90% or more of our share capital and voting rights, Turkish law provides mechanisms pursuant to which minority shareholders may, in certain circumstances, be required to sell their shares to the controlling shareholder at a fair value to be judicially determined in the absence of agreement between the parties, where the minority shareholder(s) obstruct the company’s operations, act contrary to the principle of good faith, cause noticeable distress or act recklessly.
In certain circumstances, the interests of the controlling shareholder may conflict with the interests of other shareholders, including interests of the holders of the ADSs.
In addition, this concentration of ownership may negatively affect the market price of the ADSs by, among other things, as a result of any action:
● delaying, defending or preventing a change of control, even at a per-share price that is in excess of the then-current price of the ADSs;
● impeding a merger, consolidation, takeover or other business combination involving us, even at a per- share price that is in excess of the then-current price of the ADSs;
● forcing a merger, consolidation, takeover, delisting, tender offer, squeeze out or other business combination involving us that increases the amount of indebtedness or outstanding ordinary shares, or the sale of revenue-generating assets; or
● discouraging a potential acquirer from making a tender offer or otherwise attempting to obtain control of us, even at a per-share price that is in excess of the then-current price of the ADSs.
We may lose our foreign private issuer status in the future, which could result in significant additional costs and expenses.
We are a foreign private issuer, and, therefore, we are not required to comply with all of the periodic disclosure and current reporting requirements of the Exchange Act and certain other requirements of the Sarbanes-Oxley Act. The determination of foreign private issuer status is made annually on the last business day of an issuer’s most recently completed second fiscal quarter, and, accordingly, the next determination will be made with respect to us on June 30, 2026.
On June 4, 2025, the SEC published a concept release soliciting public comments on possible changes to the definition of foreign private issuer. The potential changes highlighted by the SEC include updating the existing eligibility criteria in various ways, adding minimum non-U.S. trading volume requirements, requiring a listing on a “major foreign exchange” or requiring incorporation or headquarters in jurisdictions with robust regulatory frameworks, among other things. Additionally, the Commissioners of the SEC have suggested in various addresses in 2025 that the accommodations available to foreign private issuers, including, in particular, the ability to report in IFRS Accounting Standards as issued by the IASB without reconciling to U.S. GAAP, may be subject to review. If the SEC decides to formally propose and adopt final rules narrowing the foreign private issuer definition or related accommodations, we may lose our foreign private issuer status or otherwise need to comply with materially more onerous reporting requirements.
63
Table of Contents
If we were to lose our foreign private issuer status, as a result of a change to the current definition of foreign private issuer or otherwise, we would be required to file with the SEC periodic reports and registration statements on U.S. domestic issuer forms, which are more detailed and extensive than the forms available to a foreign private issuer, including the need to file quarterly reports on abbreviated timelines. We would also have to mandatorily comply with U.S. federal proxy requirements, and our officers, directors and 10% shareholders would become subject to all the provisions of Section 16 of the Exchange Act, beyond the more limited Section 16(a) requirements applicable from March 18, 2026, including the short-swing profit disclosure and recovery provisions. See “—The requirements of being a public company will continue to require significant resources and management attention, which could make it difficult to manage our business.” In addition, we would lose our ability to rely upon exemptions from certain corporate governance requirements under the listing rules of Nasdaq. As a U.S.-listed public company that is not a foreign private issuer, we would incur significant additional legal, accounting and other expenses that we would not incur as a foreign private issuer, and accounting, reporting and other expenses in order to maintain a listing on a U.S. securities exchange. These expenses would relate to, among other things, the obligation to present our financial information in accordance with U.S. GAAP or reconcile our financial statements to U.S. GAAP.
In such a scenario, subject to applicable law, Nasdaq rules and any required approvals, our board of directors may determine that maintaining a listing in the United States is no longer in the best interest of the Company and may decide to delist our securities from Nasdaq, which could have a material adverse impact on the liquidity of our ADSs, and could materially increase price volatility. Following such a delisting, the number of investors directly holding our ordinary shares may increase and we may be deemed a public company under the Turkish Capital Markets Law. If we were to qualify as a public company in Türkiye, even without raising any funds from the public, we would become subject to additional regulatory and disclosure requirements, which could increase our compliance costs and adversely affect our business, financial condition, results of operations and cash flows. See “—We may not maintain our listing on Nasdaq, which could limit investors’ ability to make transactions in our ADSs and subject us to additional trading restrictions.”
As a “controlled company” within the meaning of the Nasdaq rules and a foreign private issuer, we qualify for and do rely on exemptions from certain of the Nasdaq corporate governance standards, including the requirement that a majority of our board of directors consist of independent directors. Our reliance on such exemptions may afford less protection to holders of our ADSs.
Kaspi.kz controls a majority of our voting power. Under Nasdaq listing rules, a listed company of which more than 50% of the voting power for the election of directors is held by an individual, group or another company is a “controlled company,” and such a company may elect not to comply with certain Nasdaq corporate governance requirements, including (i) the requirement that a majority of the board of directors consist of independent directors, (ii) the requirement that the corporate governance and nominations committee making decisions on compensation and nominations be composed entirely of independent directors and (iii) the requirements to have a compensation committee and that such committee be composed entirely of independent directors.
Similarly, as a foreign private issuer, we are permitted to follow home country practice in lieu of most of the Nasdaq corporate governance standards. Accordingly, our board of directors and applicable committees include fewer independent members than would be required if we were subject to all Nasdaq listing rules. As such, their approach may be different from that of a board with a majority of independent directors or a committee with only independent directors and, as a result, our management oversight may be more limited than if we were subject to all Nasdaq listing rules.
We intend to continue to rely on these and other exemptions described in more detail under Item 16G. “Corporate Governance.” We may in the future elect to follow home country practices in Türkiye with regard to other matters. Accordingly, our shareholders will not have the same protection afforded to shareholders of companies that are subject to all of the Nasdaq corporate governance standards, and the ability of our independent directors to influence our business policies and affairs may be reduced.
An active trading market for our ADSs may not be sustained to provide adequate liquidity, and acquisitions of ADSs by our controlling shareholder, Kaspi.kz, may reduce the liquidity of the market for our ADSs.
We cannot predict the extent to which investor interest in us will sustain an active trading market for our ADSs on Nasdaq or how liquid that market might remain. If an active trading market is not sustained, holders may have difficulty selling the ADSs that they purchase, and the value of such ADSs might be materially impaired.
64
Table of Contents
The liquidity of the market for our ADSs may also be adversely impacted by acquisitions of ADSs by our controlling shareholder, Kaspi.kz. Since the Change of Control, Kaspi.kz has purchased a total of 14,038,032 ordinary shares represented by ADSs of the Company, representing 21.5% of outstanding ADSs. As of the date of this annual report, Kaspi.kz owns 85.66% of the Company’s outstanding share capital. Kaspi.kz may make further transactions in the Company’s ADSs, which may negatively affect the liquidity of the trading market for our ADSs, increase the price volatility of our ADSs and force us to delist if we are no longer able to meet the continued liquidity requirements imposed by Nasdaq. See “—We may not maintain our listing on Nasdaq, which could limit investors’ ability to make transactions in our ADSs and subject us to additional trading restrictions.”
We may need to raise additional funds to finance our future capital needs, which may dilute the value of our outstanding ADSs.
We may need to raise additional funds to finance our existing and future capital needs, including developing new services and technologies, and to fund ongoing operating expenses. If we raise additional funds through the sale of equity securities, these transactions may dilute the value of our outstanding ADSs. For example, on November 17, 2025, the Company’s extraordinary general assembly meeting of shareholders approved a capital increase in an aggregate amount of TRY 4,171,960,010.85, of which TRY 7,168,458.80 were allocated to the nominal value of the newly issued shares and the remaining TRY 4,164,791,552.05 were allocated to the share premium. As a result, the nominal share capital of the Company was increased from TRY 65,199,658.00, divided into 325,998,290 shares to TRY 72,368,116.80, divided into 361,840,584 shares, while the nominal value of the shares remained unchanged at TRY 0.20 (20 Kuruş). The capital increase was duly registered with the Istanbul Trade Registry and announced at the Trade Registry Gazette on December 23, 2025. As ADS holders were not able to exercise pre-emptive rights in the capital increase, the transaction was dilutive to them. See “— Shareholders and ADS holders have in the past been unable to exercise preemptive rights and may again be unable to exercise preemptive rights and, as a result, may experience substantial dilution upon future issuances of ordinary shares.” We may also decide to issue securities, including debt securities that have rights, preferences and privileges senior to our ADSs. Any debt financing would increase our level of indebtedness and could negatively affect our liquidity and restrict our operations. We also can provide no assurances that the funds we raise will be sufficient to finance our existing indebtedness. We may be unable to raise additional funds on terms favorable to us or at all. If financing is not available or is not available on acceptable terms, we may be unable to fund our future needs. This may prevent us from increasing our market share, capitalizing on new business opportunities or remaining competitive in our industry.
We may need to carry out certain corporate actions, such as a capital increase, a capital reduction, accounting set-offs or similar actions or a combination thereof to maintain compliance with local capital adequacy rules, some of which may dilute the value of our outstanding ADSs.
We are subject to Turkish minimum capital adequacy rules. We may need to carry out certain corporate actions, such as capital increases, capital reductions, accounting set-offs or similar measures or a combination thereof to ensure that we comply with applicable requirements. Some remedial corporate actions could be dilutive to ADS holders or otherwise reduce the proportion of our share capital that is represented by ADSs, which could have an adverse impact on the price and liquidity of our ADSs. Additionally, any actual or perceived failure to comply with capital adequacy rules could have a material adverse impact on our reputation and could weaken investor confidence in our business. See “—We may need to raise additional funds to finance our future capital needs, which may dilute the value of our outstanding ADSs.” and “—Shareholders and ADS holders have in the past been unable to exercise preemptive rights and may again be unable to exercise preemptive rights and, as a result, may experience substantial dilution upon future issuances of ordinary shares.”
The price of our ADSs might fluctuate significantly, and you could lose all or part of your investment.
Volatility in the market price of our ADSs may prevent you from being able to sell your ADSs at or above the price you paid for such securities. The trading price of our ADSs has been and may continue to be volatile and subject to wide price fluctuations in response to various factors, including:
● the overall performance of the equity markets;
● issuance of new or changed securities analysts’ reports or recommendations;
● negative market perception of our performance as compared to our competitors;
● additions or departures of key personnel;
65
Table of Contents
● sales of our ADSs or shares by us or our controlling shareholder or material purchases of our ADSs, or shares, by our controlling shareholder that reduce overall liquidity;
● changes in law, litigation, regulatory and tax allegations, fines or proceedings that involve us or our subsidiaries;
● general economic and geopolitical conditions, both globally and in Türkiye;
● ongoing or future occurrences of natural disasters, epidemics or other catastrophic events, including acts of war;
● changes in interest rates;
● availability of capital;
● shifts in market trends toward other types of investments, such as commodities; and
● the market price of the ADSs of Kaspi.kz, our controlling shareholder.
These and other factors might cause the market price of our ADSs to fluctuate substantially, which might limit or prevent investors from readily selling their ADSs and may otherwise negatively affect the liquidity of our ADSs. In addition, in recent years, the stock market has experienced significant price and volume fluctuations. This volatility has had a significant impact on the market price of securities issued by many companies across many industries. The changes frequently appear to occur without regard to the operating performance of the affected companies. Accordingly, the price of our ADSs could fluctuate based upon factors that have little or nothing to do with our Company, and these fluctuations could materially reduce our share price. Securities class action litigation has often been instituted against companies following periods of volatility in the overall market and in the market price of a company’s securities. For example, we were named as a defendant in certain purported shareholder class action lawsuits which have been settled. See “—Risk Factors—Legal and Regulatory Risks—We have been and in the future may be involved in litigation, some of which could be material.” We may be involved in future litigation, which may have a material adverse effect on our financial condition and results of operations.
If securities or industry analysts do not publish research or reports or publish unfavorable research about our business, or we fail to meet the expectations of industry analysts, the price of our ADSs and trading volume could decline.
The trading market for our ADSs depends in part on the research and reports that securities or industry analysts publish about us, our business or our industry. If one or more of the analysts who cover us downgrade our stock, the price of our ADSs will likely decline. If one or more of these analysts, or those who currently cover us, cease to cover us or fail to publish regular reports on us, interest in the purchase of our ADSs could decrease, which could cause the price of our ADSs or trading volume to decline.
You may not be able to exercise your right to vote the ordinary shares underlying your ADSs. As an ADS holder, you are not considered a shareholder under Turkish laws.
In accordance with Turkish laws, holders of our ADSs are not treated as one of our shareholders and do not have the same rights as our registered shareholders recorded in the share ledger of the Company. As a holder of our ADSs, you will not have any direct right to attend meetings of holders of our ordinary shares, including general assembly meetings of our shareholders, or to cast any votes at such meetings. Holders of ADSs may exercise voting rights with respect to the ordinary shares represented by their ADSs only indirectly by giving voting instructions to the depositary in accordance with the provisions of the deposit agreement. The deposit agreement provides that, upon receipt of notice of any meeting of holders of our ordinary shares, including any general assembly meeting of our shareholders, if we so request, the depositary will, as soon as practicable thereafter, fix a record date for the determination of ADS holders who shall be entitled to give instructions for the exercise of voting rights and distribute to the holders as of the record date (i) the notice of the meeting or solicitation of consent or proxy sent by us, (ii) a statement that such holder will be entitled to give the depositary instructions and (iii) a statement as to the manner in which instructions may be given by the holders.
66
Table of Contents
You may instruct the depositary of your ADSs to vote the ordinary shares underlying your ADSs. Otherwise, you will not be able to exercise your right to vote unless you withdraw the ordinary shares underlying the ADSs you hold. In addition, as a holder of ADSs, you are not entitled to attend the meeting of holders of our ordinary shares, including any general assembly meeting of our shareholders, and you are not entitled to exercise certain other rights granted to our shareholders unless you withdraw the underlying ordinary shares. However, you may not know about the meeting far enough in advance to withdraw those ordinary shares and, after making a withdrawal request, you may experience administrative delays prior to receiving those ordinary shares. For example, as set out in U.S. rules, (i) you may experience temporary delays caused by the closing of the transfer books of the depositary or the Company or the deposit of shares in connection with voting at a shareholders’ meeting, or the payment of dividends, (ii) you may be subject to the payment of fees, taxes and similar charges and (iii) the processing of your request may be subject to administrative steps in compliance with any laws or governmental regulations relating to ADSs or to the withdrawal of ordinary shares, including review of necessary documentation by local Turkish counsel, the collection of tax- and other compliance-related information and board-level approvals, all of which may cause further customary delays.
Furthermore, we cannot guarantee that you will receive the voting materials in time to ensure that you can instruct the depositary to vote the ordinary shares underlying your ADSs. In addition, the depositary and its agents are not responsible for failing to carry out voting instructions or for the manner of carrying out voting instructions. Local trade registry office practices and interpretations of regulations governing proxy collection from ADS holders have been evolving and may be subject to further change from time to time. For example, the Trade Registry recently imposed additional documentation requirements and took longer to register the voting results of the general assembly meeting. This means that you may not be able to exercise your right to vote, and there may be nothing you can do if the ordinary shares underlying your ADSs are not voted as you requested.
Shareholders and ADS holders have in the past been unable to exercise preemptive rights and may again be unable to exercise such rights and, as a result, may experience substantial dilution upon future issuances of ordinary shares.
In the event of an issuance of ordinary shares, including for purposes of a capital increase, subject to certain exceptions, each shareholder will have a pro rata preemptive right in proportion to the aggregate nominal value of the ordinary shares held by such holder. These preemptive rights may be restricted or excluded by a resolution of a general assembly meeting of shareholders or by the board of directors, which is authorized to restrict preemptive rights under a registered capital system. This could cause existing shareholders and ADS holders to experience substantial dilution of their interest in us. For example, in connection with the share capital increase approved on November 17, 2025, the preemptive rights of The Bank of New York Mellon, the depositary for the holders of the ADSs, were disapplied. See “—We may need to raise additional funds to finance our future capital needs, which may dilute the value of our outstanding ADSs.”
In the future, we may continue to disapply shareholders’ preemptive rights in connection with additional share capital increases, if we determine that this is in the best interest of the Company. In the United States, we may be required to file a registration statement under the Securities Act to implement preemptive rights. We can give no assurances that an exemption from the registration requirements of the Securities Act would be available to enable U.S. holders of ordinary shares or holders of ADSs to exercise such preemptive rights and, if such exemption is available, we may not take the steps necessary to enable U.S. holders of ordinary shares or holders of ADSs to rely on it, as such steps may entail significant time and costs and expose the Company to additional potential liabilities associated with the offering. Accordingly, you may not be able to exercise preemptive rights on future issuances of ordinary shares, and, as a result, your percentage ownership interest in us would be diluted. Furthermore, rights offerings are difficult to implement effectively under the current U.S. securities laws, and our ability to raise capital in the future may be compromised if we need to do so through a rights offering in the United States.
ADS holders may not be entitled to a jury trial with respect to claims arising under the deposit agreement, which could result in less favorable outcomes to the plaintiff(s) in any such action.
The deposit agreement governing the ADSs representing our ordinary shares provides that, to the fullest extent permitted by law, ADS holders waive the right to a jury trial for any claim they may have against us or the depositary arising out of or relating to our shares, the ADSs or the deposit agreement, including any claim under the U.S. federal securities laws.
67
Table of Contents
If we or the depositary were to oppose a jury trial based on this waiver, the court would have to determine whether the waiver was enforceable based on the facts and circumstances of the case in accordance with applicable state and federal law. To our knowledge, the enforceability of a contractual pre-dispute jury trial waiver in connection with claims arising under the federal securities laws has not been finally adjudicated by the United States Supreme Court. However, we believe that a contractual pre-dispute jury trial waiver provision is generally enforceable, including under the laws of the State of New York, which govern the deposit agreement, or by a federal or state court in the City of New York, which has non-exclusive jurisdiction over matters arising under the deposit agreement. In determining whether to enforce a contractual pre-dispute jury trial waiver, courts will generally consider whether a party knowingly, intelligently and voluntarily waived the right to a jury trial. We believe that this would be the case with respect to the deposit agreement and the ADSs. It is advisable that you consult legal counsel regarding the jury waiver provision before investing in the ADSs.
If you or any other holders or beneficial owners of ADSs bring a claim against us or the depositary in connection with matters arising under the deposit agreement or the ADSs, including claims under federal securities laws, you or such other holder or beneficial owner may not be entitled to a jury trial with respect to such claims, which may have the effect of limiting and discouraging lawsuits against us or the depositary. If a lawsuit is brought against us or the depositary under the deposit agreement, it may be heard only by a judge or justice of the applicable trial court, which would be conducted according to different civil procedures and may result in different outcomes than a trial by jury would have, including outcomes that could be less favorable to the plaintiff(s) in any such action.
Nevertheless, if this jury trial waiver is not permitted by applicable law, an action could proceed under the terms of the deposit agreement with a jury trial. No condition, stipulation or provision of the deposit agreement or the ADSs serves as a waiver by any holder or beneficial owner of ADSs or by us or the depositary of compliance with any substantive provision of the U.S. federal securities laws and the rules and regulations promulgated thereunder.
It is unlikely that we will declare any dividends on our ordinary shares represented by our ADSs and, therefore, you must rely on price appreciation of our ordinary shares for a return on your investment; also, to the extent that we declare dividends, we will pay those dividends solely in Turkish Lira.
We do not currently anticipate paying any dividends. Instead, we intend to retain earnings, if any, for future operations and expansion. Any decision to declare and pay dividends in the future will be made at the discretion of our general assembly meeting of shareholders, acting pursuant to a proposal by our board of directors, and will depend on, among other things, our results of operations, cash requirements, financial condition, contractual restrictions and other factors that our general assembly meeting of shareholders or board of directors may deem relevant. Accordingly, investors will most likely have to rely on sales of their ADSs, which may increase or decrease in value, as the only way to realize cash from their investment. There is no guarantee that the price of our ADSs will ever exceed the price that you paid.
Dividends may also be subject to limitations in the terms of our credit facility arrangements, and any dividends paid may provide our lenders with the right to accelerate outstanding amounts thereunder or result in an event of default. See “—Risks Relating to Our Business and Industry—Changes in our share ownership or other types of default could result in our inability to draw loans or cause acceleration or events of default under our indebtedness.”
To the extent we declare cash dividends in the future, we will pay those dividends solely in Turkish Lira. As the value of the Turkish Lira fluctuates continuously, a holder of our ADSs will be exposed to currency fluctuations generally and particularly between the date on which a dividend is declared and the date on which dividends are paid.
You may not receive distributions on the ordinary shares represented by our ADSs or any value for them if it is illegal or impractical to make them available to holders of ADSs.
The depositary of our ADSs has agreed to pay to you the cash dividends or other distributions it receives on our ordinary shares after deducting its fees and expenses. You will receive these distributions in proportion to the number of our ordinary shares your ADSs represent. However, the depositary is not responsible if it decides that it is unlawful or impractical to make a distribution available to any holders of ADSs. We have no obligation to take any other action to permit the distribution to any holders of our ADSs or ordinary shares. This means that you may not receive the distributions we make on our ordinary shares or any value from them if it is illegal or impractical for us to make them available to you. These restrictions may have a material adverse effect on the value of your ADSs.
68
Table of Contents
Dividends paid to holders of the ADSs who are not tax residents of Türkiye will be subject to a 15% withholding tax.
Dividends payable by a joint stock company that has its legal and/or business center in Türkiye to shareholders (both individual and corporate) who are not tax residents of Türkiye (i.e., non residents), and who do not have a permanent establishment constituted in Türkiye through a permanent representative or place of business therein, are subject to a 15% withholding tax to be deducted by the Turkish corporation from the gross amount of dividend distribution to its shareholders. Dividends distributed to a legal entity in Türkiye (which should be already registered for corporate tax in Türkiye) are exempt from such withholding tax. There is a presumption that ADSs representing our ordinary shares are being held by non-resident holders that do not have a taxable presence in Türkiye, such as a permanent establishment constituted through a representative or place of business therein. Therefore, any dividends that we may decide to distribute in the future in respect of the ADSs will be subject to this 15% withholding tax for non-resident holders based on the corresponding gross amount of distribution, which could adversely affect the value of your investment. Türkiye’s tax treaties with different countries may provide reduced dividend withholding taxes, such as 5%; however, such reduced tax rates are not usually applicable to portfolio-type investments because of minimum shareholding ratio requirements stipulated in most of Türkiye’s tax treaties. Therefore, the final withholding tax burden for ADS holders should be determined by considering their tax residency status as well as other conditions in the respective tax treaties. See Item 10.E. “Additional Information—Taxation—Material Türkiye Tax Considerations.”
You may be subject to limitations on the transfer of your ADSs.
Your ADSs, which may be evidenced by ADRs, are transferable on the books of the depositary.
However, the depositary may close its books at any time or from time to time when it deems expedient in connection with the performance of its duties. The depositary may refuse to deliver, transfer or register transfers of your ADSs generally when our books or the books of the depositary are closed, or at any time if we or the depositary think it is advisable to do so because of any requirement of law, government or governmental body, or under any provision of the deposit agreement, or for any other reason.
You may experience difficulties in effecting service of legal process, enforcing foreign judgments or bringing original actions in Türkiye based on United States or other foreign laws against us and our management.
We are incorporated and conduct a substantial portion of our business and have substantial assets located in Türkiye. In addition, the majority of our directors and officers are nationals and residents of countries other than the United States. As a result, it may be difficult to effect service of process within the United States upon these persons. It may also be difficult to enforce in U.S. courts judgments obtained in U.S. courts based on the civil liability provisions of the U.S. federal or state securities laws against us and our officers and directors who are not resident in the United States and the substantial majority of whose assets are located outside of the United States. The liability of our directors and executives towards us and our shareholders will be governed by Turkish laws, as well as the shareholding rights of investors before the Turkish courts. Further, it is unclear whether an original lawsuit against us or our directors or executive officers based on U.S. federal or state securities laws can be enforced in Turkish courts. Moreover, Türkiye does not have treaties with the United States providing for the reciprocal recognition and enforcement of judgments of courts. Therefore, even if a judgment were obtained against us or our management for matters arising under U.S. federal or state securities laws or other applicable U.S. federal or state law, it may not be possible to enforce such a judgment in Türkiye.
Furthermore, any claim against us that is denominated in a foreign currency would, upon pronouncement of our bankruptcy, only be payable in Turkish Lira, thereby shifting the currency exchange risk to you. The relevant exchange rate for determining the Turkish Lira amount of any such claim would be the Central Bank’s exchange rate for the purchase of the relevant currency, which is effective on the date when the relevant court’s decision on the bankruptcy is rendered in accordance with Turkish law. Such exchange rate may be less favorable to you than the rate of exchange prevailing at the relevant time.
69
Table of Contents
We are a Turkish joint stock company. The rights of our shareholders under Turkish law may be different from the rights of shareholders under the laws of U.S. jurisdictions.
We are a Turkish joint stock company. Our corporate affairs are governed by our Articles of Association and by the Turkish Commercial Code (“TCC”). The rights of shareholders and the responsibilities of members of our board of directors may be different from the rights of shareholders and responsibilities of directors in companies governed by the laws of U.S. jurisdictions. See Item 16G. “Corporate Governance.” The rights of our shareholders and the fiduciary responsibilities of our directors under Turkish law are not as clearly established as they would be under statutes or judicial precedent in some jurisdictions in the United States. In particular, Türkiye has a less exhaustive body of securities laws than the United States. In addition, some U.S. states, such as the State of Delaware, have more fulsome and judicially interpreted bodies of corporate law than Türkiye. For example, we are not aware of any reported class actions having been brought in Turkish courts. Such actions are ordinarily available in respect of U.S. corporations in U.S. courts. Additionally, as holders of our ADSs are not treated as shareholders under Turkish law, holders of ADSs may lack legal standing before Turkish courts to enforce certain rights held by shareholders. As a result, the holders of our ADSs could face different considerations in and have more difficulty protecting their interests in actions against our management, directors or controlling shareholder than would shareholders of a corporation incorporated in a jurisdiction in the United States, and our ability to protect our own interests may be limited if we are harmed in a manner that would otherwise give rise to jurisdiction in a U.S. federal or state court.
In the past, we have granted, and in the future we may grant, share-based compensation to our management and employees. Share-based compensation may cause your interest in the Company to be diluted and our employees’ interests to become excessively tied to the trading price of our ADSs.
From time to time, we have granted, and may in the future grant, share-based compensation to our management and employees. Share option plans for senior management and employees aim to increase their efficiency, align their interests with the interests of our shareholders and retain executives who commit to long-term earnings and short-term performance. If our shareholders or board of directors approve the issuance of new share option plans, you may be diluted in the event that the exercise price under such share option plan is lower than the trading price of our ordinary shares. In addition, new share option plans may cause the interests of our management to become excessively tied to the trading price of our ordinary shares, which may have an adverse impact on our business and financial condition.
On April 24, 2023, the board of directors adopted revisions to our Incentive Plan (as defined under Item 6.B. “Directors, Senior Management and Employees—Compensation—Incentive Plan”), which were subsequently approved at the Company’s general assembly meeting, pursuant to which grants may be made to a larger pool of Plan Participants (as defined under Item 6.B. “Directors, Senior Management and Employees—Compensation—Incentive Plan”). Certain Plan Participants have in the past been granted, and may in the future be granted awards of restricted stock units and performance stock units. For more information about our Incentive Plan, see Item 6.B. “Directors, Senior Management and Employees—Compensation—Incentive Plan” and Note 26 audited consolidated financial statements included elsewhere in this annual report. See also “—We depend upon our senior management, our IT specialists and other talented employees to grow, operate and improve our business; if we fail to attract, retain and motivate key personnel, our business could be adversely affected.”
We may not maintain our listing on Nasdaq, which could limit investors’ ability to make transactions in our ADSs and subject us to additional trading restrictions.
Our ADSs are listed on Nasdaq. We cannot assure you that our ADSs will continue to be listed on Nasdaq in the future. Listings are not mandated by law, and we may decide to delist our ADSs from Nasdaq at any time for cost-saving, strategic or other reasons, whether in connection with a “take-private” transaction, merger, squeeze out, tender offer or otherwise. Alternatively, even if we wish to remain listed, we may not be able to. In order to continue listing our ADSs on Nasdaq, we must maintain certain financial, distribution and share price levels, including that our ADSs cannot have a bid price of less than US$1.00. Due to share price fluctuations and other considerations, we have not always been able to meet this requirement. For example in 2023, the trading price of our ADSs ranged from US$0.61 to US$1.89 per ADS. On July 22, 2022, on November 3, 2022, and on March 22, 2023, we received written notices from the Listing Qualifications Department of Nasdaq indicating that the bid price for our ADSs had closed below the minimum bid price requirement of US$1.00 per share under the Nasdaq Listing Rules (the “Listing Rules”) for 30 consecutive trading days. Pursuant to Listing Rule 5810(c)(3)(A), we had 180 calendar days from the date of the relevant notice, or January 18, 2023, May 2, 2023, and September 18, 2023, respectively, to regain compliance (by achieving the minimum bid requirement for 10 consecutive trading days), during which time the ADSs would continue to trade on the Nasdaq Global Select Market. While we regained compliance with the minimum bid requirement on August 17, 2022, January 31, 2023, and April 6, 2023, respectively, and our share price has not dropped below the threshold since then, we may in the future experience further drops in share prices, which could again result in non-compliance with Nasdaq requirements.
70
Table of Contents
In order to continue listing our ADSs on Nasdaq, we must also maintain compliance with certain liquidity requirements, including a minimum number and market value of publicly held shares and a minimum number of shareholders. Our controlling shareholder, Kaspi.kz, has purchased, in a number of privately negotiated transactions, ordinary shares represented by ADSs of the Company. As of the date of this annual report, Kaspi.kz owns 85.66% of the Company’s outstanding share capital. Kaspi.kz has stated that it re-examines its investment in the Company on a continuing basis and, as a result, may make further transactions in the Company’s ADSs, which may negatively affect the liquidity of the trading market for our ADSs, increase the price volatility of our ADSs and force us to delist if we are no longer able to meet the continued liquidity requirements imposed by Nasdaq. See “—An active trading market for our ADSs may not be sustained to provide adequate liquidity, and acquisitions of ADSs by our controlling shareholder, Kaspi.kz, may reduce the liquidity of the market for our ADSs.”
If Nasdaq delists our ADSs from trading on its exchange and we are not able to list our ADSs on another national securities exchange, we expect our ADSs could be quoted on an over-the-counter market. However, if we were to be delisted from Nasdaq, we could face significant material adverse consequences, including:
● investors disposing of our ADSs;
● a limited availability of market quotations for our ADSs;
● reduced liquidity for our ADSs;
● reduced availability of information concerning the trading prices and volume of our ADSs;
● fewer broker-dealers willing to execute trades in our ADSs;
● a determination that our ADSs represent a “penny stock,” which will require brokers trading in our ADSs to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for our ADSs;
● a limited amount of news and analyst coverage;
● a decreased ability to issue additional ADSs or obtain additional financing in the future; and
● an increase in the number of Turkish investors holding our ordinary shares, which may cause us to no longer qualify as a private company under Turkish law, which would subject us to additional regulatory and disclosure requirements.
We can provide no assurance that any action taken by us to restore compliance with listing requirements would be sufficient to maintain our listing or allow our ADSs to become listed again, stabilize the market price or improve the liquidity of our ADSs, prevent our ADSs from dropping below the Nasdaq minimum bid price requirement or prevent future non-compliance with Nasdaq’s listing requirements.
If we were no longer listed on Nasdaq, our ADSs may no longer qualify as “covered securities” for the purposes of Section 18(b) of the Securities Act and Rule 146 thereunder. As such, our ADSs would be subject to regulations in each state in which we may offer our securities, which would add additional complexity, time and expense to ensure compliance with the applicable state’s securities laws with respect to ADRs being purchased or sold in that state, which may have a material adverse effect on our business, financial condition and/or results of operations. An active, liquid trading market for our ADSs may not be maintained.