LifeLock Inc. (NYSE: LOCK)
Shares of LifeLock got clobbered yesterday when the FTC put out a press release stating that LifeLock violated a settlement reached with the FTC in 2010. That original settlement agreed upon by LifeLock and the FTC along with 35 state attorneys general had three main points: LifeLock needed to stop making deceptive claims about its services, do a better job of actually protecting its clients’ personal information, and pay $12 million in consumer refunds. Those terms seem fairly simple to abide by to avoid getting into trouble in the future. But apparently LifeLock had trouble sticking to those terms.
LifeLock Makes the Same Mistakes Again
The Federal Trade Commission asserts that LifeLock essentially made the same mistakes from 2012 to 2014 that it got dinged for in 2010. They again failed to live up to the company’s main mission statement by not creating robust enough security procedures to actually protect customers’ personal information and data. They also continued to make deceptive claims by declaring that they use the same protective systems as financial institutions. Another false claim made by LifeLock was that they alert user “as soon as” any red flag was noticed. And, finally, LifeLock failed to meet the record keeping requirements that it agreed to abide by in 2010. Actions to be taken against LifeLock by the FTC have not been released to the public yet.
Can Shares of LOCK Recover?
The news was pretty catastrophic for the company’s stock price. Immediately following the FTC announcement, shares of LOCK plummeted from $15.87 to $11.89 in a matter of nine minutes. At 2:11 PM, trading on LOCK was halted at the $11.89 mark. When trading was resumed after a few minutes, shares dropped all the way down to $10 in a matter of three minutes before trading was halted again. Trading resumed at 2:47 PM with shares touching a low of $7.70 before closing at $8.15. That was quite a long way for LOCK to fall from an open of $16.05 and an intraday high of $16.22. They are now sitting on levels they have not seen since early 2013.
Nothing But Negative Press
Things have not recently been peachy for LifeLock outside of the dismal FTC headline either. A story was published on June 30th reporting that the “Refer A Friend” section of LifeLock’s own website could be used to find out customers’ usernames and passwords. Once the issue was reported, LifeLock fixed the loophole. But it seems like a bad sign for a security business when your own website can be tricked into giving away access to the very information people are paying you to protect. Just over a week ago, LifeLock made small headlines with a breach of contract dispute over a startup called Xapo that was supposedly started on LifeLock’s campus. The ruling that the case can continue is favorable for LifeLock, but it muddies the water surrounding LifeLock’s acquisition of the mobile wallet platform Lemon. And this story is older, but it is a priceless example of LifeLock not being able to accomplish their company’s one goal of protecting customers’ security. Maybe you remember seeing CEO Todd Davis giving away his social security number in TV commercials. He is so confident that LifeLock can protect his identity that he yells his social security number into a megaphone and runs the commercials nationwide. And then his identity was stolen 13 times.
Company Profile
LifeLock Inc. is an identity theft protection company headquartered in Tempe, Arizona. The company detects and alerts customers of fraudulent activities involving their social security number. Plans range from $9.99 to $29.99 per month and LifeLock says it will spend up to $1,000,000 to repair any damages done to your identity while you are a paying member.
