St. Jude Medical filed a lawsuit on Wednesday against investment firm Muddy Waters Research and MedSec Holdings, a cyber security company, claiming they intentionally released false information to manipulate St. Jude's stock and make a profit, reported Reuters.
St. Jude's shares fell on Aug. 25 after Muddy Waters took a short position on the company's stock. Short-sellers borrow shares and sell them with the expectation that the price will drop. Once the price falls, short-sellers buy back the shares, return them to the lender, pay a borrowing fee and pocket the difference, according to the report.
Muddy Waters said the firm's position on the stock was based on research from MedSec, which has a financial agreement with the firm. MedSec stated that St. Jude's heart devices lacked crucial cybersecurity and were unsafe for patients.
"We felt this lawsuit was the best course of action to make sure those looking to profit by trying to frighten patients and caregivers, and by circumventing appropriate and established channels for raising cyber security concerns, do not use this avenue to do so again," Michael Rousseau, president and CEO of St. Paul, Minn.-based St. Jude, said Wednesday in a statement.
St. Jude's stock fell about 4 percent since Muddy Waters issued its position. Shares closed at $78.90 Tuesday.
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