LifeLock (NYSE:LOCK) pulled off its IPO today, but it was far from a smooth ride. The deal was priced at $9 — below the planned $9.50-$11.50 range — and so far in today’s trading, the shares are off by about 1.6%.
LifeLock is a top player in the identity-theft protection business, with about 2.3 million members who pay a subscription of $10 to $25 per month. For the first half of this year, revenues came to $125.5 million, and the company saw a profit of $11.6 million.
Decent numbers … so why the lackluster IPO? Well, I had a chance to interview the chairman and founder of IDentity Theft 911, Adam Levin. Here’s what he had to say:
Q: I’ve never heard of IDentity Theft 911 and I’m sure many others haven’t either. Perhaps some background on the company? When did it start? How large is it? Might there be plans to go public?
A: IDentity Theft 911 is a B2B provider of identity and data risk management, resolution and education services, founded in 2003. While the name IDentity Theft 911 might not be widely recognized by consumers, the company is well-known in the business sector. The company serves 17.5 million households across the country and provides fraud solutions for a range of organizations, including seven of the top 10 insurance companies, like The Hartford (NYSE:HIG), MetLife (NYSE:MET) and Allstate (NYSE:ALL).
IDentity Theft 911 is in the process of evaluating a variety of growth path options and has not discounted the possibility of a public offering at a future date. While the company is a major force in the insurance vertical, it is in the process of expanding into the forensics, travel, medical, private office and non-profit sectors as well.
Q: What’s your take on the LifeLock deal?
A: The fundamentals of their business model may concern the investor community. Specifically, there is a high cost to acquire and keep customers, and a long period until that customer becomes profitable. The model uncertainty can be seen in the prior year’s financial results.
There also could be concern with the price paid for ID Analytics and how it fits into their current business model, especially in light of the IPO being driven to pay off the debt from that acquisition.
Finally, there could be lingering concerns from the FTC fine and their reputation in the marketplace. A segment of the consumer market may not have an issue with it, but they still have challenges with the remaining consumer market and, more importantly, the commercial market. Recent actions taken by the Consumer Finance Protection Bureau against financial institutions and their partners’ marketing practices as it relates to ID theft products will have a chilling effect on companies who have had past misdeeds.
Q: What’s your take on the prospects of the market for identity theft protection?
A: The market for identity theft protect products and services is expanding far beyond traditional offerings of credit and fraud monitoring products that have been its mainstay. It is moving rapidly into individual and corporate reputation defense, privacy and security. The direct-to-consumer side of the business has flattened over the past few years because marketers have been unsuccessful in their efforts to convince consumers of the true dangers of what is a growing disaster, due to the nature of social networking and hacker sophistication.
Personal services and technology are the elements that will propel future successful companies. Beyond this, most consumers believe that their privacy, online safety and protection are the responsibility of the financial services community, and as such, the expense should be borne by that community and not by them. The winners in the space will be those companies that develop relationships with consumers through trusted organizations.
Tom Taulli runs the InvestorPlace blog IPOPlaybook, a site dedicated to the hottest news and rumors about initial public offerings. He is also the author of “How to Create the Next Facebook.” Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.