Market Mad House

In individuals, insanity is rare; but in groups, parties, nations and epochs, it is the rule. Friedrich Nietzsche

Market Insanity

Will LifeLock Ever Die?

daniel , , , , , ,

LifeLock (NYSE: LOCK) reminds me of a cockroach; it is a disgusting pest that is very hard to kill. Not even lawsuits and action by federal regulators seem to stop this company from functioning.


LifeLock, for those that have not seen its seemingly endless stream of advertising, is a company that claims to protect individuals from identity theft. Currently, LifeLock is in major trouble with the Federal Trade Commission (FTC).

On July 21, 2015, the FTC alleged that LifeLock had violated a settlement agreement it had signed with the agency and 35 state attorneys generals in 2010. The FTC alleged that LifeLock was continuing to make deceptive claims about its products just as it did five years ago.

To make matters worse, the FTC is alleging that LifeLock did not have a comprehensive information security program to protect customers’ sensitive personal data, including Social Security, credit card and bank account numbers, The Palm Beach Post reported. The company also allegedly advertised that it had such protections in place when it did not.

Another FTC allegation is that LifeLock falsely claimed it issued around-the-clock identity theft alerts when it did not. The FTC has even asked the U.S. District Court for Arizona to order LifeLock to provide full redress to its customers. In plain English, the FTC wants the court to order LifeLock to give its customers their money back.

LifeLock Stock Collapses

What’s truly astounding is that LifeLock shares were trading at around $16 apiece on July 20, 2015, the day before the FTC action. Not surprisingly, the share price fell to $7.79 by the end of business on July 24, 2015.

lock

If that wasn’t insane enough, LifeLock’s share price was $18.23 as recently as December 29, 2014. One has to wonder what exactly drove the stock to that price; LifeLock is a company that reported a net income of -$2.37 million on March 31, 2015, down from $53.7 million in March 2014, meaning that LifeLock lost $56.07 million in a year. LifeLock is also the company that offered customers a profit margin of -6.81% and a return on equity of -.74%.

Now what’s truly disturbing is that LifeLock had a Market Cap of $735.14 million on July 24, 2015, and an enterprise value of $441.79 million. That means the company’s stock was worth more than the company. If that wasn’t ridiculous enough, LifeLock had a market cap of $1.522 billion on July 20, 2015. That means LifeLock management team succeeded in wiping out $733.618 million in shareholder value, or over half the company’s market capitalization, in a single day.

LifeLock Faces Five Stockholder Lawsuits

One has to wonder how much longer this company can survive and exactly who was stupid enough to invest in it. Not surprisingly, at least five class action lawsuits have been filed against LifeLock on behalf of shareholders, press releases indicate.

locks

The law firms are closing in on LifeLock like a wolf pack goes after a wounded animal. Firms currently suing LifeLock include Ryan & Maniskas, LLP, Gainey, McKenna & Egleston, Hagens Berman, Abraham, Fruchter & Twersky, and Levi & Korsinsky.

One has to wonder if this latest round of legal action will finally kill off LifeLock or if, like a cockroach, it will continue to survive? Sadly, enough there is a strong possibility that LifeLock will stick around just like a roach and continue to pollute both the stock market and the airwaves with its odious business practices. Some pests just never seem to go away.