New Delhi: Israeli technology firm NSO Group is exploring options that include shutting its controversial Pegasus unit and selling the entire company, according to sources familiar with the matter.
The scandal-plagued spyware company is in danger of defaulting on its debts. Discussions have been held with several investment funds about moves that include a refinancing or outright sale, said the sources, who asked not to be named, according to a report by Bloomberg.
The sources revealed that the company has brought in advisers from Moelis & Co. to assist and lenders are getting advice from lawyers at Willkie Farr & Gallagher.
The prospective new owners include two US funds that have discussed taking control and closing Pegasus, one of the people said. Under that scenario, the funds would then pump in about $200 million in fresh capital to turn the know-how behind Pegasus into strictly defensive cyber security services, and perhaps develop the Israeli company’s drone technology, one of the sources said. Elements of the potential transaction were reported earlier by Debtwire.
Pegasus software can track a user’s mobile phone. The misuse of the software has landed NSO at the centre of high-profile privacy and human rights violation cases. The product allegedly was supplied to governments that used it to spy on political dissidents, journalists, and human right activists. Pegasus was also reported to have been used in recent months to hack the mobile phones of at least nine State Department employees.
NSO Group has said it sells the technology to law enforcement and government agencies to prevent crime and terrorism, and it has ended deals with clients that abused it. The US Commerce Department nevertheless blacklisted NSO, which said in November it was seeking to reverse the decision, “given that our technologies support US national security interests and policies.”
A loan with a face value of over $300 million that NSO issued in 2019 was trading in November at an all-time low bid of 70 cents on the dollar. It was quoted on Monday at a bid of 50 cents on the dollar, the sources added.
Pegasus shutdown could leave NSO as a much smaller and potentially less-valuable firm, as the unit accounts for about half of NSO’s revenue. The company expects to record about $230 million in sales this year, one of the sources said, 8 per cent less than in 2018.
Apple Inc. has sued NSO, seeking to bar the spyware firm from using its products and services, and said it would start notifying users targeted by state-sponsored hacking.
The US restrictions put added pressure on NSO, which needs to pay back about $450 million in debt, just two years after a management buyout that valued the firm at about $1 billion. Moody’s Investors Service said last month there’s an increasing risk the company will violate the terms of its loans.