Bankers Say Ashley Madison Can Kiss IPO Plans Goodbye

Infidelity website AshleyMadison.com, which includes been struggling to launch a London IPO, can kiss goodbye plans for an inventory this season, banking sources said on Tuesday, as hackers threatened to create names and salacious information regarding its clients unless the web site shuts itself down.

The website’s Canadian parent hoped to improve up to $200 million by listing its shares in London this season, five years after too little investor appetite caused it to cancel an effort to list in the home.

Hackers threatened to leak nude photos, sexual fantasies, real names and credit card information for as much as 37 million customers worldwide of Ashley Madison, which uses the slogan: "Life is short. Have an affair."

The info breach, bad for any business which has a repository of confidential customer data, could possibly be disastrous for just one whose business model is founded on complete confidentially.

"The doomsday scenario for Ashley Madison is if the hackers take all of the names and addresses, correlates them to real people and prints addresses and telephone numbers. That may kill it," said a Canadian investment banker, who asked never to be named.

With an increase of than 37 million members worldwide, Ashley Madison claims to be the world’s second-largest dating site. Only Match.com, owned by media mogul Barry Diller’s IAC/InterActive Corp, is bigger.

Avid Life Media, the parent company of Ashley Madison and websites such as for example Cougarlife.com and EstablishedMen.com, values itself at $1 billion. It reported revenue of $115 million in 2014, up 45 percent from the preceding year.

"Of course they will need to put any IPO plans on ice. It’ll be at least a couple of months before any banks would consider touching it," said another Canadian investment banker.

"I don’t believe this kills the business, unless all of the data eventually gets leaked."

A long time before it explored an inventory in Europe, Avid Life had reached out to Toronto’s GMP Securities in regards to a listing in Canada, however the idea didn’t gain traction, two banking sources said.

"The idea was that there is reputational risk, therefore the IPO never happened," said among the bankers who declined to be identified because he had not been authorized to talk with media.

The banker said that due to those concerns the valuation was significantly less than other businesses on the web and in the tech industry.

"Through the years, they tried to accomplish lots of things to attempt to monetize the asset," the banker said. "Ultimately, they made a decision to just hold on to it, instead of sell it. Investment bankers wrestled with it because it’s an extremely, very profitable business."

Avid Life spokesman Paul Keable said it had been prematurily . to estimate the harm to the company’s business design or IPO plans from the breach. The business hasn’t commented on whether it could shut down when confronted with the hackers’ threat.

The web site allows members to gain access to some basic features free of charge, but charges to send or receive messages, photographs and gifts. Female members are permitted to send "collect messages" that male members must purchase so that you can read them.

In addition, it offers a $19 full delete option for folks to eliminate their profiles. That claim seemed to have incensed the hackers who insisted that clients cannot fully delete personal data.

The website allows members to join up without disclosing private information such as for example their name, phone number or home address. However, the hackers allege that information is available from credit card payments.

Avid Life said it had since secured the website and was dealing with police agencies to trace those behind the attack. In addition, it said it really is convinced the hackers were formerly linked to the business.

Crisis communications experts said Avid Life had made a good move around in quickly saying it could know who was simply behind the hack, removing some uncertainty from the problem because of its clients.

Still, Wells Fargo analyst Gray Powell said in an email Tuesday that the hack will generate remediation costs and could expose Avid Life to potential legalities.

"While that is clearly a distinctive case, the Ashley Madison breach demonstrates that security is approximately a lot more than just budget dollars and that lost customer data can dramatically impact business plans, brand perception and even company valuations," he said.

(Additional reporting by John Tilak in Toronto and Allison Lampert in Montreal; Editing by Amran Abocar and Ken Wills)

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