Why Shares of LifeLock Inc. Collapsed

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of LifeLock  fell as much as 19% today after the identity-theft protection company said it would temporarily suspend its Wallet mobile application.

So what: LifeLock disclosed in a security filing that it had determined that some parts of the mobile app are not fully compliant with payment card security standards. It removed the app from mobile app stores, deleting all related customer data with it. In a blog post explaining the decision, the company said it has "no reason to believe the data has been compromised," and that it would re-release Wallet once it had "the highest level of PCI compliance."  

Now what: In the post, CEO Todd Davis was vague about the areas of noncompliance, though that seems understandable given the sensitive nature of the matter. He did not provide a schedule for Wallet to be up and running again. LifeLock originally acquired Wallet in its December purchase of Lemon for $42.6 million, and today's slide took about $200 million off the company's market cap, proof of how damaging an issue like this can be for a high-tech security company and risking LifeLock's reputation. After a first-quarter loss and the Wallet suspension announcement, I'd wait to see LifeLock prove that this issue hasn't significantly affected its business before getting invested. 

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The article Why Shares of LifeLock Inc. Collapsed originally appeared on Fool.com.

Jeremy Bowman has no position in any stocks mentioned. The Motley Fool recommends LifeLock. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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