Around 2 p.m. ET today, shares of LifeLock collapsed over 35% and had to be halted due to circuit breakers. The reason for the drop? A curious tweet straight from FTC Chair Edith Ramirez announcing that the regulatory agency was taking actions against LifeLock for violating terms of its 2010 settlement regarding charges of false claims made on its Identity Theft Prevention and Data Security services.
Shares of LifeLock had been trading just north of $16 a share but have been halted at a new multi-year low of $10 per share, wiping out over half a billion to its market cap.
Here is the tweet in question:
The decision to tweet the announcement during market hours did raise questions as to the way the news was disclose. In 2010, LifeLock had agreed to pay $12 million for misrepresenting the degree to which users of its $10-a-month service were protected from identity theft. At the time, the settlement was one of the largest FTC-state coordinated settlements on record. In the official 2010 announcement of the settlement, former FTC Chairman Job Leibowitz had stated, "While LifeLock promised consumers complete protection against all types of identity theft, in truth, the protection it actually provided left enough holes that you could drive a truck through it."
Here's the havoc the tweet caused to LifeLock today:
The FTC's official Twitter page added to Ramirez's tweet with a link to the full statement, and followed it up with links to resources for free identity protection.
— FTC (@FTC) July 21, 2015
"It is essential that companies live up to their obligations under orders obtained by the FTC," Jessica Rich, the FTC's Bureau of Consumer Protection head, was quoted as saying. "If a company continues with practices that violate orders & harm consumers, the FTC will act."
For their part, LifeLock issued a statement within the hour in response to the FTC's charges. Emphasis added in bold.
“After more than 18 months of cooperation and dialogue with the FTC, it became clear to us that we could not come to a satisfactory resolution of their issues outside a court of law. We disagree with the substance of the FTC’s contentions and are prepared to take our case to court.
“LifeLock is proud of the valuable service we provide to our members. Quite simply, our members are our highest priority, and we work hard to protect them against threats to their identity. We help our members by alerting them of potential identity threats and, if a member does become a victim of identity theft, our specialists step in. We spend up to $1 million to help in remediation and recovery.
“Importantly the FTC is not seeking any relief that would change LifeLock services and products going forward. The claims raised by the FTC are all related to the past, not to current business practices.
“LifeLock takes the accuracy of our advertising materials very seriously. The alerting claims raised by the FTC did not result in any known identity theft for LifeLock members.
“Security of our systems has always been, and will remain, of primary importance to us. Based on the evidence, we do not believe that anything the FTC is alleging has resulted in any member’s data being taken. As required by the FTC's consent order in 2010, LifeLock hired highly-credentialed, independent professionals to assess its information security. We are committed to maintaining high standards and to continual improvement, and we have spent thousands of hours and millions of dollars to achieve those standards in full compliance with the order. Every audit completed by those third parties affirmed that we were in compliance.”
Shares remain halted. It will be interesting to see where they go once they resume trading.
UPDATE: Shares of LifeLock have resumed trading, and in an expectedly volatile range.
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