After huge controversy, spyware company NSO Group may shut down Pegasus

    NSO Group is exploring options that include shutting its controversial Pegasus unit.
    By BLOOMBERG
    | Updated on Dec 14 2021, 12:32 AM IST
    Pe.gasus software can track a user’s mobile phone, and its misuse has landed NSO Group at the center of high-profile privacy abuse cases. 
    Pe.gasus software can track a user’s mobile phone, and its misuse has landed NSO Group at the center of high-profile privacy abuse cases.  (REUTERS)
    Pe.gasus software can track a user’s mobile phone, and its misuse has landed NSO Group at the center of high-profile privacy abuse cases. 
    Pe.gasus software can track a user’s mobile phone, and its misuse has landed NSO Group at the center of high-profile privacy abuse cases.  (REUTERS)

    NSO Group Ltd., the scandal-plagued spyware company that’s in danger of defaulting on its debts, is exploring options that include shutting its controversial Pegasus unit and selling the entire company, according to people familiar with the matter.

    Talks have been held with several investment funds about moves that include a refinancing or outright sale, said the people, who asked not to be identified as the discussions are private. The company has brought in advisers from Moelis & Co. to assist, and lenders are getting advice from lawyers at Willkie Farr & Gallagher, the people said.

    The prospective new owners include two American funds that have discussed taking control and closing Pegasus, one of the people said. Under that scenario, the funds would then inject 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 people said.

    A spokeswoman for Herzliya-based NSO declined to comment. A representative for New York-based Moelis said the company declined to comment. A representative for Willkie Farr didn’t immediately respond to requests for comment. Elements of the potential transaction were reported earlier by Debtwire.

    Pegasus software can track a user’s mobile phone, and its misuse has landed NSO Group at the center of high-profile privacy abuse cases. The product allegedly was supplied to governments that used it to spy on political dissidents, journalists and human right activists.

    The company has said it sells the technology to law enforcement and government agencies to prevent crime and terrorism, and that it has ended contracts with clients that abused it. The U.S. Commerce Department nevertheless blacklisted NSO, which said in November it was seeking to reverse the decision, “given that our technologies support U.S. national security interests and policies.” 

    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 U.S. 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 company 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.

    A shutdown of Pegasus could leave NSO as a much smaller and potentially less valuable company, because 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 people said, 8% less than in 2018.

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    First Published Date: 14 Dec, 12:32 AM IST
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