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Hurricane Equifax: 143 Million Impacted, 35% Loss In Equity Value, Suspicious 135 Strike Price Put Trades On Aug 21

This is a syndicated repost courtesy of Snake Hole Lounge. To view original, click here. Reposted with permission.

Recent hurricanes Harvey and Irman have caused massive destruction in Texas and Florida, respectively. And then we have Jose which may strike New York City. [Check Ventusky for the forecast map].


Now The Balance Begins To Shift

The balance between QE and Treasury supply will begin to shift in July. The underlying bid it has provided for stocks and Treasuries will begin to fade.

This report tells why, and what to look for in the data and the markets.  GO TO THE POST


But none of these hurricanes have the potential to impact as many people as Hurricane Equifax, the massive breach of 143 million Americans’ personal information (Social Security numbers, credit card numbers, birthdates and other information).

According to the Washington Post,  “The tale began on July 29, when the company’s security team detected suspicious network traffic associated with the software that ran its U.S. online-dispute portal. After blocking that traffic, the company saw additional “suspicious activity” and took the portal’s software offline.

At this point, Equifax’s retelling grows cloudy. The company said an internal review then “discovered” a flaw in an open-source software package called Apache Struts used in the dispute portal, which it then fixed with a software patch. It subsequently brought the portal back online.

But that vulnerability had been known publicly since early March 2017, and a fix was available shortly thereafter — facts that Equifax acknowledged in its Friday statement. The company did not say why the software used in the online-dispute portal hadn’t been patched earlier, although it claimed that its security organization was “aware” of the software flaw in March, and that it “took efforts” to locate and fix “any vulnerable systems in the company’s IT infrastructure.”

Three Equifax executives — not the ones who are departing — sold shares worth a combined $1.8 million just a few days after the company discovered the breach, according to documents filed with securities regulators.

Equifax shares have lost a third of their value since it announced the breach.

While the suspicious activity occured on July 29, Equifax did not report the incident until September 7. Although Equifax clearly understood the seriousness of the breach since 3 Equifax executive sold their shares a few days after discovering the breach. Thus far, Equifax has lost 35% of its share value.

equifaxxx

Equifax Corporate Bonds took a hit as well. But the rise in their bond price after the breach was detected was primarily due to declining 10 year Treasury yields as opposed to something nefarious.

equifax23bond

There were two disclosed insider trades immediately AFTER the July 29 breach detection (Gamble and Plodder). Chief Financial Officer John Gamble banked $946,374 on the sale and Consumer Information Solutions President Rodolfo Ploder earned $250,458. In the same filing, Loughran exercised an option to buy 3,000 shares at a price of $33.60.

equinsidertrades

While there is nothing suspicous about Equifax bond price decline, there is something really odd about the Equifax put option at a 135 strike price that traded on August 21. At $0.75 too!

put135

I have no idea who purchased these profitable put options (at unusally large volume for Equifax) since it was before the revelation of a data breach on September 7th. But the trades stick out like a sore thumb.

eq135p

 

Wall Street Examiner Disclosure: Lee Adler, The Wall Street Examiner reposts third party content with the permission of the publisher. The opinions expressed in these reposts are not those of the Wall Street Examiner or Lee Adler, unless authored by me, under my byline. I curate posts here on the basis of whether they represent an interesting and logical point of view, that may or may not agree with my own views. Some of the content includes the original publisher's promotional messages. No endorsement of such content is either expressed or implied by posting the content. All items published here are matters of information and opinion, and are neither intended as, nor should you construe it as, individual investment advice. Do your own due diligence when considering the offerings of information providers, or considering any investment.

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