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Decrypted: Tesla’s ransomware near miss, Palantir’s S-1 risk factors
Another busy week in cybersecurity.
In case you missed it: A widely used messaging app used by over a million protesters has several major security flaws; a little-known loophole has let the DMV sell driver’s licenses and Social Security records to private investigators; and the U.S. government is suing to reclaim over $2.5 million in cryptocurrency stolen by North Korean hackers from two major exchanges.
But this week we are focusing on how a Tesla employee foiled a ransomware attack, and, ahead of Palantir’s debut on the stock market, how much of a risk factor is the company’s public image?
THE BIG PICTURE
Russian charged with attempted Tesla ransomware attack
$1 million. That’s how much a Tesla employee would have netted if they accepted a bribe from a Russian operative to install malware on Tesla’s Gigafactory network in Nevada. Instead, the employee told the FBI and the Russian was arrested.
The Justice Department charged the 27-year-old Russian, Egor Igorevich, weeks later as he tried to flee the United States. According to the indictment, his plan was to ask the employee to deliberately deploy ransomware on the Gigafactory’s network, grinding the network to a halt for a ransom of several million dollars. The would-be insider threat is likely the first of its kind, one ransomware expert told Wired, as financially driven hackers continue to up their game.
Tesla founder Elon Musk tweeted earlier this week confirming that Tesla was the target of the failed attack.
The attack, if carried out, could have been devastating. The indictment said that the malware was designed to extract data from the network before locking its files. This data-stealing ransomware is an increasing trend. These hacker groups not only encrypt a victim’s files but also exfiltrate the data to their servers. The hackers typically threaten to publish the victim’s files if the ransom isn’t paid.
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‘We are seeing volume and interest in Peloton explode,’ says company president on listing day
This morning, Peloton (NASDAQ: PTON), the tech-enabled stationary bicycle and fitness content streaming company, raised $1.2 billion in its NASDAQ initial public offering. Despite dropping more than 10% in its first day of trading — ultimately closing down 11% at $25.84 per share — the IPO was a bona fide success. Peloton, once denied (over and over again) by VC skeptics, now has hundreds of millions of dollars to take its business into a new era. One in which, the media, hardware, software, logistics and social company attempts to become a generation-defining company akin to Apple.
Founded in 2012 — six years after Soul Cycle opened its first cycling studio in New York’s Upper East Side and two years before a Soul Cycle founder, Ruth Zukerman, jumped ship to launch her own indoor cycling business, Flywheel Sports — a man by the name of John Foley made the ambitious, some might say foolish, decision to start a company that would sell these exercise bikes direct-to-consumer. That way, you could take a Soul Cycle class, in essence, in the comfort of your own home. Even better, technology would improve the experience.
As my colleague Josh Constine recently described it, these bikes come outfitted with a 22-inch Android screen, transforming an outdated exercising experience and bringing it into 2019: “It makes lazy people like me work out. That’s the genius of the Peloton bicycle. All you have to do is Velcro on the shoes and you’re trapped. You’ve eliminated choice and you will exercise,” Constine writes.
Peloton’s ability to get people exercise — a feature driven by its talented instructors (some of whom were poached from competitor Flywheel Sports) — ultimately had venture capital investors funneling $1 billion, roughly, into the business. Today, Peloton operates dozens of showrooms across the U.S., counts 1.4 million total community members — defined as any individual who has a Peloton account — and over 500,000 paying subscribers. Why? Because the company, as stated in its IPO prospectus, “sells happiness.”
“Peloton is so much more than a Bike — we believe we have the opportunity to create one of the most innovative global technology platforms of our time,” writes Foley. “It is an opportunity to create one of the most important and influential interactive media companies in the world; a media company that changes lives, inspires greatness, and unites people.”
Peloton’s flagship product, a tech-enabled stationary bike.
Peloton’s community coupled with the high margins on sales of its $2,245 bikes had the company reporting $915 million in total revenue for the year ending June 30, 2019, an increase of 110% from $435 million in fiscal 2018 and $218.6 million in 2017. Its losses, meanwhile, hit $245.7 million in 2019, up significantly from a reported net loss of $47.9 million last year.
What’s next for Peloton? The opportunities are endless, given the company’s firm seat at the intersection of hardware, software, media content and more. A third product may be in the works, expansion to international markets or new instructors. Peloton is going after a massive market ripe for disruption. What’s certain is that we’ll see a whole lot of cash flowing into fitness tech copycats in the next couple of years.
Peloton, following a number of lukewarm consumer IPOs (Uber), nearly doubled its valuation to $8.1 billion this morning after pricing its IPO at the top of its range, $29 per share. To answer some of our most burning questions, we chatted with Peloton’s president William Lynch, the former CEO of Barnes & Noble, about the float.
The following conversation has been edited for length and clarity.
Peloton president and former Barnes & Noble CEO William Lynch.
Kate Clark: What’s next for Peloton?
William Lynch: We now have over a billion in capital to fuel more growth, especially in the area of product innovation.
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