Companies & Industries

Equities unmoved by Prism leaks

Spy scandal? What spy scandal?

(Photo: Richard Newstead/Getty Images)

(Photo: Richard Newstead/Getty Images)

Much of the world has reacted with shock over the revelations of what is almost certainly the greatest surveillance operation in recorded history in the form of the U.S. National Security Agency’s PRISM program. The first of what may be a flood of lawsuits have been launched by the American Civil Liberties Union. The various corporations—many of whom are inextricably entwined with daily social and business life—that have been implicated in the scandal appear to be complicit to some degree.  But a funny thing happened on the way to Big Brother’s house: nothing. As it turns out, while there is a sizable segment of the public that is outraged, investors don’t seem to much care and have yet to mete out any punishment on the trading floor.

Since the publication June 5 of the leaked documents by The Guardian and Washington Post, the stocks of AOL, Apple, Facebook, Google, Microsoft, Verizon and Yahoo have barely reacted. And what movement there has been is well within the range of normal market action. Between June 4 and June 12 average price was up 0.2% (based on closing numbers). That compares quite favourably with both the Nasdaq and the Nasdaq Tech 100, which for the same period were down -1.3% and -1.6%, respectively. Of the seven equities, only Apple and Yahoo are down, and just slightly.

So what gives? Surely, the PRISM program has to rank right up there with business disasters like the Facebook IPO or Netflix trying to change its prices. Those translated into significant market valuation losses at the time as customers, investors, or both, abandoned the services.


Troy Crandall, analyst with investment firm MacDougall MacDougall & MacTier, suggests the reason there’s been no reaction is that too many major players have been implicated. This makes it non-viable to abandon any single one of them in favour of another. “The public has reason to be concerned about it, but as for investors we’d be more concerned if it was focused on one particular company. But the fact that it’s spread across all your major ones that people would use, it’s kind of like, well, what other option would there be? Where else are you going to go?”


“There’s other factors that are contributing to the daily moves as opposed to [the spying revelation],” says Drew McReynolds, analyst at RBC Capital Markets. In the case of Apple and Microsoft, both were only days away from big public presentations for new products when the scandal broke. Any movement in their stocks is much more likely related to this than anything else.

Indeed, the companies are a who’s who of social media, computing and the Internet. Even if people wanted to break from them, very few people can do without either Google, the Windows or Apple OSes, or, recent audience troubles aside, Facebook. And if you’re using your smartphone? In fact, the NSA already had that covered even before Verizon, having tapped AT&T and BellSouth at least as far back as 2001.

If investors are unmoved by the revelations, there is still for the named companies a potentially huge credibility issue that could impact their bottom lines. Brand strategist Bruce Philp has written in Canadian Business that online privacy is overrated and that handing over personal details is the price of keeping the Internet mostly free. The latest incident hasn’t quite changed his mind. Of the NSA’s surveillance he says no one should be surprised. “So the extent to which the government has access to that stuff, I think [public reaction] turns on really understanding what they have access to. This idea that they’re looking at a passing river of data looking for anomalies—that’s not a very threatening characterization and that is how they’re characterizing it. But that’s a different thing from having people listen in on our phone calls.”

It could be that people are hostile to government intrusion only on an abstract level. In the U.S. a number of polls have indicated that a slim majority are accepting of widespread surveillance on the basis of fighting terrorism. (In Canada a January 2013 survey for the federal privacy commissioner showed about 63% of Canadians are comfortable with organizations being required to disclose personal information without a warrant in a variety of circumstances.) Or it could be, as Philp says, “It just feels to me like we don’t wanna know.”

People are unlikely even to change their behavior to avoid revealing more of themselves, says Adam Metz, VP business development of CRM company The Social Concept. “People are so into having a completely personalized experience. The average Internet user has probably known for the past five or six years that when you type in, say a Yahoo e-mail message, that that data has been read by machines, not by people, in order to make a more targeted advertising experience. And people are understanding of that. Your status updates and likes on Facebook are guiding your ad experience on Facebook. I don’t think people are that uncomfortable with it. They’re willing to put up with it.”


Data collection is the lifeblood of most of these companies and if consumers were to significantly pull back from engagement the results could be severe. Could that yet be in the cards? “The answer varies a little bit by brand,” says Philp. “In the case of Google, the answer is very probably no. The value that they provide us is so significant that we’re prepared to pay a pretty handsome price in terms of our privacy to get it. Whereas in the case of Facebook they’ve got bigger fish to fry. There’s some good evidence that engagement in Facebook is really thin and brittle. And this kind of thing could sort of push them over the edge.”

Most of the implicated companies have since come out first with strong denials of involvement and more recently public entreaties to the U.S. government to allow them explain in more detail just what they’ve been up to with all that data.

But those awaiting some new revolution and pushback against the government may have to wait yet longer. Lawsuits against the government have a history of going nowhere, shutdown, ironically, for the same reasons of national security used to justify the initial spying. And the public is just not that interested. Says Metz, who is based in San Francisco, “I don’t think people are really going to be changing their data sharing patterns. It’s kinda business as usual down here. I’ve not heard anyone say I’m going to stop sharing on Facebook this week.”