- St. Jude Medical saw its shares drop more than 8% Thursday after a report by Muddy Waters Capital said the firm is short the stock because of a finding that the company has been "grossly negligent" in producing cardiac devices that are vulnerable to cyberattacks, CNBC reported.
- The company's shares partially recovered, ending the day down more than 5% at $77.82. The shares closed at $78.01 last Friday.
- The finding came from cybersecurity firm MedSec, which said it went to Muddy Waters rather than St. Jude Medical directly because of a history of St. Jude not responding to security concerns.
St. Jude Medical is now facing the fallout and will need to keep together its impending acquisition by Abbott Laboratories, based on an original stock value of approximately $85 per share--or if that deal falls apart, likely see its stock tumble to $55 or lower, according to Muddy Waters' Carson Block.
Muddy Waters went so far as to advocate the recall and remediation of St. Jude's cardiac devices, which it said could result in a 50% decrease in the company's revenue for two years. It also suggested the company is likely to face protracted litigation for gross negligence around the devices, and estimated that a verdict could result in $6.4 billion in awards.
St. Jude Medical disputed the vulnerability findings Friday, arguing the report was based on "flawed test methodology on outdated software" and stating, "...we conclude that the report is false and misleading."
The report argued St. Jude's cardiac devices are vulnerable to two types of cyber attacks that can be exploited by low-level hackers, including methods to cause malfunction and to cause battery drain.
Abbott is now facing troubled acquisitions on two fronts, with both St. Jude Medical and diagnostic device provider Alere, which is attempting to force its deal through despite Abbott getting cold feet after Alere revealed multiple probes that have impacted its stock value as well.