eToro
By eToro
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When hackers attack: do stocks suffer?

While hackers have been around since the first personal computer made it into our homes way back in the 1980s, it’s only in the past year that we’ve seen Wall Street start to take notice. This shift in focus has come about as a wave of hacking attacks hit large companies all throughout last year.

Hacker

The most notorious of these was the Sony hack which took place in November 2014. North Korean hackers broke into the company’s private emails in response to the then impending release of the Seth Rogan and James Franco comedy, “The Interview”. And the bad news for Sony didn’t end there. Recently, Wikileaks has made the questionable decision to publish the private company emails hijacked by the hackers. What ensued was another round of public shaming for Sony execs and its stars including Ben Affleck, Angelina Jolie, and David O’Russel among many others.

And while the Sony hack has captured most of the limelight, it is certainly not an isolated incident. Companies such as Office Depot, Kmart, JPMorgan, eBay, Apple, and even the United States Postal service have suffered major hack attacks during last year which directly harmed their customers’ privacy.

Just a few weeks ago, Tesla’s Elon Musk discovered that his personal Twitter account had been hijacked (after the company’s website and Twitter account had been hacked as well) and was promising free Teslas to followers who called a certain number. As it turned out, the phone number was picked at random, and a certain family in Illinois was flooded with phone calls asking for their free Tesla.

All that sounds like trouble in the PR domain, but do these attacks have real repercussions on company stock prices? And should investors react to news of a company being hacked?

The hesitation effect

To probe further, let’s take a look at Sony’s price chart:

Sony hack attack chart

As we can see, back in November 2014 when Sony was hacked, the stock took a bit of a hit and dropped in price from a peak of $22.13 down to $19.75. However, only a couple of months later the uptrend continued and the stock reached new highs of over $30 per share.

The hick-up around the Wikileaks release on April 16th of this year looks even smaller, lasting only a few days. On the most basic level, the chart shows investor hesitation following news of a hacker attack, but one that only halts the stock’s rise temporarily rather than reversing the trend.

All in all, the hack attack and the threats of physical violence that followed generated a lot of buzz around Rogan and Franco’s “The Interview”, which only helped its profits. As for the Sony Pictures brand in general, bad PR for a movie production company just isn’t likely to hurt an individual film’s box office numbers, as demonstrates by the frankly bizarre success of “Paul Blart: Mall Cop 2”.

The same phenomenon can be observed around the Apple hack in August last year:

Apple hack attack chart

What we see is a break in the uptrend that picks up again after about a month. Let’s remind ourselves that the iCloud hack during which millions of private photos had been stolen was a major crisis for Apple and did severe damage to users’ trust in the brand.

Yet the brand’s strength carried through, even though a patch to protect against further iCloud break-ins was not released until December 2014. As early as mid September everyone was already talking about the release of the iPhone 6, having forgotten about the very real chance of any photos taken with the new device ending up on the internet.

So what to do when a company you’re investing in gets hacked?

Fortune reports that with the rising threat of cyber terrorism, most companies believe they will be hacked in 2015. In the eventuality that this happens to a company you’re investing in, the data suggests that the best thing to do is keep calm and carry on. A hacker attack presents an immediate crisis, but isn’t likely to hurt a well established brand in any fundamental way.

If you get news of a hack attack on a company whose stock CFD you’re thinking about buying, it’s probably a good idea to wait for the initial drop off in prices for a chance to pick up the stock at a bargain.

What in your opinion has been the worst hack attack so far? Speak your mind!

 

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