This suggests that Equifax's stock price has experienced a slight dip but is still stable after the data breach fallout.
However, in September 2017, Equifax released a statement to inform the public that they were victims of a massive data breach that affected 143 million Americans. These details included First Names, Social Security numbers, Date of birth, addresses, and finally the number of driver’s licenses. It was considered one of the biggest and most impactful data breach events that took place in modern history.
Because the breach was quite extensive and millions of people had their information exposed, most people thought Equifax would face severe sanctions. Some even demanded investigations, lawsuits, and even the resignation of certain personnel. People doubted the security of their services and even the business functioning of the corporations behind them. Still, two years and a few months later, Equifax traders managed to maintain relatively stable, which is quite impressive.
Here are some reasons why Equifax has avoided a lasting stock price decline:
Limited competition Equifax is one company in the field of credit reporting which is a very competitive and highly profitable market segment together with TransUnion and Experian. This type of market structure thus affords them a monopolistic status even after the breach. Consumers have no say in the credit bureau – the bureaus get their information on them systematically. And so, Equifax has not suffered the effects of attrition, where customers dumped them for other service providers after the scandal. Their basic strengths are preserved.
Necessary service Though cybersecurity professionals advise people to freeze credit reports to protect against identity theft, lenders require access to such reports to issue loans. Banks, credit card companies, insurers, and employers that use Equifax customers can’t just quit using credit reports. Equifax understands this locked-in set of clients cannot afford to sever their ties despite the issues at hand. Their service still is useful in the efficient functioning of lending markets.
Government ties The company has a very close working relationship with some of the largest government institutions, including the IRS, Social Security Administration, Federal Reserve, and Department of Homeland Security. They operate fraud detection and identity authentication services that are almost the nerve center of governmental activities. This means that dealing with such contracts and partnerships would entail a massive effort and time to unravel them. I highly doubt that the government will withdraw itself just because of one scandal. This revenue seems safe.
Ongoing monitoring revenue Interestingly, after the data breach incident, it made more consumers to subscribe credit monitoring products sold by Equifax for a monthly fee. The scandal led to heightened consumer demand for the services of all three bureaus, particularly concerning identity theft protection. Interestingly, the very concerns Equifax raised about security can lead to profit for the company.
Settlements cap costs Equifax currently has about 300 lawsuits from state regulators, consumers, and banks because of the breach. Then, they agreed to pay $700 million to the American regulators, which gave a limit to their maximum potential exposure. Looking at the big picture, this amount cannot be considered a disaster for a company that has annual revenues exceeding $3 billion. We now have a numerical expression for the worst-case scenario of casting.
No executive accountability Equifax’s top managers who were in office during the data breach, which left around 147m consumers affected, received a free pass. CEO Richard Smith retired at the age of fifty-three with a 90 million dollar package funded primarily by Equifax’s sale of Smith’s held stocks. Other leaders who were in his position also continued to stay in their positions of power. The board was not threatened by any changes in terms of the renewal of its members. The fact that Equifax retains the same leadership team from before makes its operational path less of a concern, which is comforting for shareholders.
Ongoing data collection On the most fundamental level, Equifax continues to make money because it is legal for them to carry on harvesting the personal/financial data of Americans and reselling that data to banks, landlords, employers, and car dealers in the form of credit reports/scores. But this underlying data harvesting machine just keeps on truckin’ despite its habitual security failures.
In conclusion, Equifax has been able to avoid a long-term negative impact on its stock because it has an untouched market position, constant revenue generation, and comparatively low legal expenses. Shareholders seem to believe that the firm can minimize the losses by navigating through the worst of this storm. While advocates praise the Equifax settlement for holding company executives accountable, critics maintain that Equifax failed to provide sufficient accountability and consumers remained helpless. But in the end, the world’s financial markets responded positively to the company’s staying power. The leading credit bureau, of course, continues to function as before, with little change in this historic security breach. Their stock price is relatively high as a way of underlining the sustainability of their current strategic position in the American credit reporting system.
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