The cover-up is worse than the crime.
That’s the lesson every politician, and every businessperson, should have learned from Watergate. Unfortunately, lessons learned aren’t always lessons practiced.
Are you listening, Marissa Mayer?
Apparently not, as the Yahoo! (YHOO) CEO is just now letting the public know that over 1 billion accounts had been hacked … and that this hack happened more than three years ago!
The fallout from the Wednesday disclosure by the search engine and content site was swift. At the end of the trading session, YHOO shares were down more than 6%.
That’s a big ouch. But not as big an ouch as the real fallout from the failure to disclose …
That is, the possible jeopardizing of Yahoo’s merger deal with Verizon (VZ).
According to reports from Bloomberg, Verizon is exploring either an exit or potentially a significant price cut from its $4.8 billion pending acquisition of Yahoo’s web business.
Here’s the money quote from Bloomberg:
While a Verizon group led by AOL Chief Executive Officer Tim Armstrong is still focused on integration planning to get Yahoo! up and running, another team, walled off from the rest, is reviewing the breach disclosures and the company’s options …
That’s not good news if you’re a Yahoo! shareholder, but it is a teachable moment for us all.
Verizon is reportedly assessing the damage from the massive data breach, where Yahoo! has admitted that user data from more than 1 billion accounts was stolen in August 2013.
That’s the second major breach the company has disclosed in just the past three months. Back in September, the company said that a 2014 hack affected some 500 million user accounts.
That damage could turn out to be favorable to Verizon shareholders, as the company may get a $1 billion markdown on its deal because of said damage.
What’s important here for Verizon is that it negotiates a separation from any future legal fallout from the Yahoo! breaches. Toward that end, Verizon is seeking to have Yahoo! assume any lasting responsibility for the hack damage.
That legal fallout has already started, as it only took a few hours after Yahoo’s Wednesday breach disclosure for one Yahoo! user to file a class-action lawsuit.
The lawsuit alleges:
"Yahoo failed, and continues to fail, to provide adequate protection of its users’ personal and confidential information … Yahoo users’ personal and private information has been repeatedly compromised and remains vulnerable.”
That’s the kind of damage accusation that can lead an acquiring company to do a bit of renegotiation on a deal’s price tag. And that’s most likely what’s going to happen in this case. (If the deal even goes through.)
So, by failing to come right out and admit fault on yet another data breach, Marissa Mayer has placed the Verizon deal in further jeopardy.
|YHOO closed 6.1% lower today, while VZ gained 0.3% in lockstep with the broader markets.|
And that is the lesson to be learned here … as once again, the cover-up is almost always worse than the original crime.
Another lesson for investors is that the Yahoo! reveal once again highlights the need for greater cyber-security.
This is an issue we’ve written on in the recent past, as it’s part of the wider problem of "hacktivism."
Hacktivism in the technical sense refers to situations where hackers try to change the outcome of a situation (e.g., the U.S. presidential election and the hacking of the DNC emails).
Whether or not you have a Yahoo! account that’s been compromised, today’s events are a good reminder that these kinds of data breaches are something we all must be on guard against … at all times.
The reason why is because our entire cyber lives are at risk from both hacktivists and common cyber criminals.
Trump’s been mum on his plans to combat cyber criminals. But with Americans’ most-sensitive data at stake, earmarking federal dollars to shield us from online attacks would likely be money well-spent. At our Sound Dollar Campaign, we have more than a few ideas where that money could come from. Sign up for our free newsletter today, to stay up-to-date and help us to hold our leaders accountable.
Our social media accounts, email accounts, bank accounts, computer files and even our very identities are subject to hacks. On top of that, if you own a computer and a smartphone or other digital device, your hardware and software are also at risk.
As investors, we can take advantage of the need to combat this threat by looking at the best companies, and the best stocks, in the cyber-security space.
In a recent issue of our Cash Flow Kings newsletter, we added one strong cyber-security name to our portfolio that’s doing remarkably advanced work in identifying cyber-attacks early … sometimes before they even occur.
If you’d like to know more about this dynamic cyber-security play, then check out Cash Flow Kings today. Click here to take it for a risk-free trial today.
What do you think about the Yahoo! breach, the lessons that should have been learned, and the ongoing need for cyber-security solutions? As always, I want to hear from you, so let me know what you think by leaving me a comment on our website or sending me an e-mail.
It was a positive day on the Dow, S&P 500 and Nasdaq after yesterday’s post-Fed pullbacks. Each closed about 0.3% higher.
• In other hacking news, the owner of the Ashley Madison dating site agreed to pay a $1.6 million penalty. The company said it is unable to pay the rest of the $17.5 million settlement ordered after the 2015 data breach that affected some 36 million customers.
• Want to see a cool graphic of some of the world’s biggest data breaches? This image is courtesy of a site called Information is Beautiful.
• Facebook (FB) vows to fight fake news. The company says it is teaming up with third-party fact checkers to help spot and remove fake and/or misleading stories that appear in users’ feeds. FB shares rose 0.3% today.
• Gold fell to a 10.5-month low, down 2.9% to $1,129.80. Yesterday’s quarter-point Fed Funds rate hike (and promise of three hikes in 2017) … coupled with the U.S. dollar surging to a 14-year high today … helped to shave $34 off the yellow metal’s price.
Good luck and happy investing,
Uncommon Wisdom Daily