Despite settling FTC dispute, Zoom watches shares plunge on COVID-19 vaccine news
Shares in Zoom Video Communications Inc. plunged today on news that a COVID-19 vaccine may be available soon, but it wasn’t all bad news as the videoconferencing company settled a dispute with the U.S. Federal Trade Commission.
Zoom has been a standout company and stock during the pandemic as hundreds of millions of people have been forced to work online during COVID-19 lockdowns and travel restrictions. Zoom went public in April 2019 at $35 per share before closing its first day of trading at just over $65 per share, but little did the company know then what 2020 would bring.
Fast forward 18 months and Zoom shares peaked at $588.84 on Oct. 16 as its user count continued to surge. As of its second-quarter earnings report released in August, revenue was up 355% year-over-year, outperforming analysts’ predictions.
Historically, pandemics don’t last forever and though it still may be some time off until the COVID-19 pandemic ends, news from Pfizer Inc. that its vaccine is 90% effective in its Phase 3 trials has many now believing that there may be light at the end of the tunnel that isn’t an oncoming train.
People no longer being forced to work from home means fewer people needing to use Zoom, and investors know that. Zoom stock closed regular trading down more than 17%, to $413.24.
Today the FTC and Zoom also announced that they had entered a consent agreement over misleading statements concerning Zoom’s security features. The FTC claims that Zoom misled users by touting that it offered “end-to-end, 256-bit encryption” to secure users’ communications when it instead provided a lower level of security. Further, the FTC also claims that Zoon maintained cryptographic keys that could allow it to access the content of customer meetings, something that should not be possible with proper end-to-end encryption.
Under the terms of the settlement, Zoom has agreed to a requirement to establish and implement a comprehensive security program, a prohibition on privacy and security misrepresentations and other detailed and specific relief to protect its user base.
“During the pandemic, practically everyone — families, schools, social groups, businesses — is using videoconferencing to communicate, making the security of these platforms more critical than ever,” Andrew Smith, director of the FTC’s Bureau of Consumer Protection, said in a statement. “Zoom’s security practices didn’t line up with its promises and this action will help to make sure that Zoom meetings and data about Zoom users are protected.”
The agreement between the FTC and Zoom is subject to public comment for 30 days, after which the Commission will decide whether to make the consent order final.
Zoom had announced it was rolling out end-to-end encryption Oct. 14.
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