Theranos Finally Bleeds Out

Theranos Finally Bleeds Out

After top executives, including CEO Elizabeth Holmes, were indicted for defrauding investors of $700 million, the Wall Street Journal reported that current Chief Executive David Taylor announced the decision to shareholders that besieged blood-testing company Theranos will formally dissolve.

Theranos, which was listed in the tenth edition of ourIn VitroDiagnostics report, was delisted in the recently published eleventh edition due to the ongoing scandal; the report can be foundhere.

Theranos was found to be in default with its creditor, Fortress Investment Group. With just $5 million in cash remaining, well below the threshold established by the terms of a $65 million Theranos received in 2017, Fortress is entitled to foreclose upon the company’s assets. Taylor is trying to distribute the remaining cash to other unsecured creditors, which he estimates will take six to twelve months. In total, however, Theranos owes $60 million to these creditors, not including Fortress. In a maneuver ultimately conducted in vain, investment bank Jefferies Group, LLC reached out to over 80 potential buyers of the company over a period of four months.

Federal prosecutors in San Francisco filed charges in June against Holmes and the company’s president, Ramesh “Sunny” Balwani. Two counts for conspiracy to commit wire fraud against Theranos investors, doctors, and patients were filed against the defendants, as well as nine additional counts of wire fraud; they have denied the charges and are set to appear in federal court on the first of October. If convicted, they may serve up to 20 years in prison and fines of $250,000—plus restitution to their victims—may be levied against them. The indictment came a few months after the Securities and Exchange Commission settled civil fraud charges against Holmes.

The company’s meteoric rise was credited to Holmes’s claims that her company could conduct a whole host of diagnostic tests with just a fingerstick sample of blood; home blood tests were sold in Walgreens stores in California and Arizona. Holmes, aged 19 at Theranos’ founding, became a rockstar among Silicon Valley startups for such claims, which were ultimately shown to be unfounded. Not long ago, Theranos was valued at $9 billion, and included several high-profile investors on its board, including Secretary of Education Betsy DeVos, media mogul Rupert Murdoch, and members of the Walton family, founders of the largest company in the world, by revenue. None of the investors will receive a penny.