The Theranos Story, ch. 38: take our shares, but don’t sue us; Murdoch writes it off

click to enlargeWhat? They’re not toast yet? Far from it. We’ve missed the impossibly twisty soap opera called Theranos, and our latest episode holds to the previous high standard.

CEO and controlling shareholder Elizabeth Holmes is offering shareholders, supposedly from her personal holdings, about two additional shares for each one purchased. This has been offered to the investors in the 2014-2015 $600 million round who bought in at about $15-17/share (ch. 27), such as Cox and Bechtel. The deal dilutes their share cost to about $5. The caveat? Don’t sue Theranos. According to the Wall Street Journal‘s report (Yahoo Finance as WSJ is paywalled), it was approved by Theranos’s board in February, and most investors have ‘signaled that they will sign off on it’. Others are the family of US Education Secretary Betsy DeVos, the Waltons of Wal-Mart Stores Inc. and John Elkann, the Italian industrialist who controls Fiat Chrysler Automobiles NV.

One who is washing his hands is News Corp. executive chairman Rupert Murdoch. He reached a separate settlement for a nominal sum–rumored to be $1–to sell back his shares and legally write off his $125 million investment.

Others are not so lucky. Early investors before that round are not included. These include Partner Fund Management, which is suing for its $96 million investment claiming misrepresentation. Others presumably are Larry Ellison, Draper Fisher Jurvetson, ATA Ventures and Sandbox Industries. Lucas Venture Group also invested in late 2013 and Robert Colman, a private investor, is suing. Unknown: the status of a private investor who purchased via SharesPost at $19/share in August 2015, Safeway ($30 million), and Walgreens Boots, which last year sued to claw back its $140 million.

In ch. 36, we noted that Theranos told shareholders in January that they had $200 million cash on hand. It now has $150 million or less. This Editor has also noted that while Ms Holmes may be giving now-worthless shares away, in true Silicon Valley Manner, she will maintain control no matter what. Ars Technica, CNBC, Stuff.co.nz (New Zealand)

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