Pacemaker stock shorted on hacking fears

The stock of pacemaker manufacturer St. Jude Medical fell sharply on Thursday after short-selling firm Muddy Waters said it had placed a bet that the shares would fall, claiming its implanted heart devices were vulnerable to cyber attacks.

St. Jude, which agreed in April to sell itself for $25 billion to Abbott Laboratories, said the allegations were false.

St. Jude shares closed down 5 percent, at $77.82, the biggest one-day fall in seven months and at a 7.4 per- cent discount to Abbott’s takeover offer.

Muddy Waters head Carson Block said the firm’s position was motivated by research from a cyber security firm, MedSec Holdings, which has a financial arrangement with Muddy Waters. MedSec asserted that St. Jude’s heart devices were vulnerable to cyber attack and were a risk to patients.

A MedSec report warned of two primary hacks on St. Jude pacemakers and defribillators: one that could cause implanted devices to pace at potentially dangerous rates and one that drains their batteries.

MedSec approached Muddy Waters about three months ago and the two struck a deal under which Block agreed to hire MedSec as a consultant, pay it a licensing fee for research and a percentage of any profits from the investment, Block told Reuters.

Reuters was not able to confirm the allegations by Block and MedSec, a firm founded 18 months ago focusing on cyber vulnerabilities in the health- care industry. The allegations were detailed in a report published on the Muddy Waters Web site.

The Department of Homeland Security and the Food and Drug Administration, which work together to investigate and remediate life-threatening cyber vulnerabilities in medical equipment, declined comment on St. Jude.

St. Jude Chief Technology Officer Philip Ebeling said there were several layers of security in place for its devices.