St. Jude Medical (STJ) Mentioned as Short at Muddy Waters

August 25, 2016 10:53 AM EDT

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(Updated - August 25, 2016 10:57 AM EDT)

St. Jude Medical (NYSE: STJ) was mentioned cautiously by short seller Muddy Waters Research. The report suggests that close to half of STJ’s revenue could disappear for approximately two years as the company's pacemakers, ICDs, and CRTs should be recalled amid cyberattack risk.

"STJ’s pacemakers, ICDs, and CRTs might – and in our view, should – be recalled and remediated. (These devices collectively were 46% of STJ’s 2015 revenue.)," said Muddy Waters. "Based on conversations with industry experts, we estimate remediation would take at least two years. Even lacking a recall, the product safety issues we present in this report offer unnecessary health risks and should receive serious notice among hospitals, physicians and cardiac patients."

The report added, "We have seen demonstrations of two types of cyber attacks against STJ implantable cardiac devices (“Cardiac Devices”): a “crash” attack that causes Cardiac Devices to malfunction – including by apparently pacing at a potentially dangerous rate; and, a battery drain attack that could be particularly harmful to device dependent users. Despite having no background in cybersecurity, Muddy Waters has been able to replicate in-house key exploits that help to enable these attacks."

Shares of St. Jude are lower by about 2% on the session.

SI NOTE: St. Jude Medical, Inc (NYSE: STJ) is in a deal to be acquired by Abbott (NYSE: ABT). Under the agreement, St. Jude Medical shareholders will receive $46.75 in cash and 0.8708 shares of Abbott common stock.

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