Skip to Content

Want to Make a Buck in the Stock Market? Bet Against Companies Likely to Be Hacked

When hackers expose flaws in products, a company’s share price can fall, and traders are getting wise to the pattern.
September 6, 2016

The next big way to make money might be short-selling the stock of a company that you believe to have a security flaw.

It’s certainly what Carson Block, the founder of research firm Muddy Waters, tried to do when he issued a report announcing that he was shorting shares of the medical device manufacturer St. Jude. He claimed that the company’s pacemakers and defibrillators could be easily hacked—perhaps with fatal consequences.

The move was the result of research conducted by a security firm called MedSec Holdings. Block shorted stock in the company based on the assumption that public knowledge of such a vulnerability would cause the St. Jude share price to fall. It did.

It’s actually unclear whether the claims made by MedSec and Block are totally accurate. St. Jude has called them “false and misleading," while University of Michigan medical device security expert Kevin Fu has also questioned their accuracy.

But facts alone do not shape the financial markets.

So markets moved, while financial experts rushed to speak with medical device cybersecurity consultants and find out if the reports were accurate. Jonathan Butts, one such consultant, told Bloomberg that the situation “is almost like The Big Short—someone saw something that nobody else did."

In fact, also much like The Big Short, this kind of trade is “entirely novel,” according to the Bloomberg piece, and it might have some fairly profound ramifications in the future.

Financial markets can shift quickly, and it’s not clear that analysts at banks are particularly well-placed to determine the veracity of these kinds of security claims. Wall Street, then, may potentially look to identify new expertise to help them move faster in such situations.

Hackers may be able to get in on the profits, too. Rather than quietly announcing vulnerabilities online or at conferences, many security experts might be tempted to follow MedSec in sharing their discoveries with traders. It could be worth their while—though it may add insult to injury for the companies that are affected.

(Read more: Bloomberg, Business Insider, Reuters)

Keep Reading

Most Popular

Workers disinfect the street outside Shijiazhuang Railway Station
Workers disinfect the street outside Shijiazhuang Railway Station

Why China is still obsessed with disinfecting everything

Most public health bodies dealing with covid have long since moved on from the idea of surface transmission. China’s didn’t—and that helps it control the narrative about the disease’s origins and danger.

individual aging affects covid outcomes concept
individual aging affects covid outcomes concept

Anti-aging drugs are being tested as a way to treat covid

Drugs that rejuvenate our immune systems and make us biologically younger could help protect us from the disease’s worst effects.

Europe's AI Act concept
Europe's AI Act concept

A quick guide to the most important AI law you’ve never heard of

The European Union is planning new legislation aimed at curbing the worst harms associated with artificial intelligence.

Stay connected

Illustration by Rose WongIllustration by Rose Wong

Get the latest updates from
MIT Technology Review

Discover special offers, top stories, upcoming events, and more.

Thank you for submitting your email!

Explore more newsletters

It looks like something went wrong.

We’re having trouble saving your preferences. Try refreshing this page and updating them one more time. If you continue to get this message, reach out to us at customer-service@technologyreview.com with a list of newsletters you’d like to receive.