Theranos to investors: Please don’t sue! Here, have some more shares

In a desperate attempt to avoid more lawsuits, Theranos is giving additional shares to investors who promise not to take the troubled blood-testing startup to court.

The deal, which hasn’t been disclosed publicly, was approved by the Palo Alto-based company’s board last month, The Wall Street Journal reported, citing anonymous “people familiar with the matter.” They said most investors have tentatively agreed to the deal.

Those extra shares are coming from none other than founder and CEO Elizabeth Holmes’ personal cache, the Journal reported. That means the beleaguered founder, who has remained stubbornly at the helm of her struggling startup even though federal regulators have barred her from running a medical lab for two years, would give up her majority ownership in the company.

Theranos’ most recent investors, who contributed more than $600 million, could get about two extra shares for each one they bought, according to The Journal.

But how much are those shares really worth?

Last year, Forbes estimated that in light of Theranos’ recent woes, the company’s valuation has dropped from $9 billion to just $800 million. That means, Forbes wrote, that Holmes’ 50 percent stake in her company is worth essentially nothing.

Theranos also has reached an agreement to buy back Rupert Murdoch’s shares — which he bought in 2015 for about $125 million — for just $1, the Journal reported.

The company has suffered after recent revelations that its signature blood-testing device, which was supposed to conduct multiple tests using a finger prick’s worth of blood, didn’t work as promised. The company has been slammed with sanctions by federal regulators, and laid off 155 workers in January. Now the team is turning in a new direction — focusing on commercializing a new blood-testing product instead of running its own labs.

And Theranos is trying to stay out of court. The company already has been sued by one of its investors — San Francisco-based hedge fund Partner Fund Management (PFM). The hedge fund, which poured nearly $100 million into Theranos, is seeking to recover that amount and then some, citing the company’s “series of lies, material misstatements, and omissions.”

Theranos isn’t the first troubled company to take drastic steps to try to keep its investors happy — or at least out of court. San Francisco-based human resources startup Zenefits, in trouble with regulators for letting brokers sell insurance without the proper licenses, willingly slashed its own valuation by more than half last summer in an effort to restore its relationship with investors.

Photo: Elizabeth Holmes, founder and CEO of Theranos, speaks at the Fortune Global Forum in San Francisco on Nov. 2, 2016. (Jeff Chiu/AP)

 

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  • angry american

    Sue them into oblivion I knew they were a fraud from the start I have been a medical lab tech for over 25 years and their claims about what they could do didn’t make start to me from the start

  • samadams2000

    PRISON- Get your affairs in order Holmes.

  • IJK

    Paraphrasing Cicero, how much longer will this woman abuse the public’s patience? She should have been prosecuted for fraud ages ago. She’s nothing but a scammer.

 
 
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