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It's just a matter of time before huge writedowns in the valuation happen. And Elizabeth Holmes won't be described as a billionaire for much longer (which unle

by jonknee 11y ago

It's just a matter of time before huge writedowns in the valuation happen. And Elizabeth Holmes won't be described as a billionaire for much longer (which unless I have missed something is almost all on paper). Without a drastic plot twist it appears this company is little more than vaporware. At least the investors that will lose their money are people who should have all known better (and can afford the loss!), back in the dot com boom this thing would have been held by mom and pop.

chimeracoder 11y ago
> And Elizabeth Holmes won't be described as a billionaire for much longer (which unless I have missed something is almost all on paper) Almost anytime a startup gets to a valuation that high, the founders have had an opportunity to take some money off the table. VCs like this, because it keeps the founders' incentives aligned with the investors' (they are more likely to take risks and swing for the fences if they don't have to worry as much about their own personal net worth). It's dangerous if the founder divests entirely, but you want them to have enough that they aren't too worried about the risk of the company collapsing to make bold decisions when necessary. That said, I don't know Theranos's cap table, but it's probably unlikely that her current stake in Theranos is worth $1B on paper even today - did she really manage to achieve a $9B valuation while holding onto 11% of her company?
- txttran 11y ago
  It says in the article that she has >50% equity.
  - no_wave 11y ago
    I'm going to guess that these big name investors have liquidation preferences of at least 2x, meaning that her stake will probably be worth nothing once this all blows up even if the company maintains any value (and it probably won't anyways)
- Animats 11y ago
  Expect investor lawsuits against her personally. This goes way beyond business failure. It's unusual for a regulatory agency to bar the CEO from an industry, unless they're a crook.
- lawnchair_larry 11y ago
  Her current stake is irrelevant. She sure won't be selling it. It's only a question of what was already cashed out.
coderjames 11y ago
> back in the dot com boom this thing would have been held by mom and pop. Who also should have known better. If someone doesn't understand how a company they invest in makes a profit, or what the risks to that company are, they have no business investing in it. For example, I hold agency-MBS REITs in my portfolio, but only because I'm willing to read the quarterly filings and keep an eye on news relevant to interest rates. They are absolutely not an investment I would recommend to most people who want something simple they can "set and forget."
- mortona 11y ago
  No. Retail investors don't have the opportunity to scrutinize the company's records beyond what is publicly availbale, to take up references, or to meet with the management team. The VCs and funds investing in late-stage private companies do have these options. They can do as much, or as little, due-diligence as they like. And not just because they can demand things as a condition of the investment, but because it's perfectly reasonable to spend $50,000 on a couple of expert technical opinions when you're investing $1m+ but unfeasible if you're putting in $30k of life savings.

by jonknee 11y ago

chimeracoder 11y ago

> And Elizabeth Holmes won't be described as a billionaire for much longer (which unless I have missed something is almost all on paper) Almost anytime a startup gets to a valuation that high, the founders have had an opportunity to take some money off the table. VCs like this, because it keeps the founders' incentives aligned with the investors' (they are more likely to take risks and swing for the fences if they don't have to worry as much about their own personal net worth). It's dangerous if the founder divests entirely, but you want them to have enough that they aren't too worried about the risk of the company collapsing to make bold decisions when necessary. That said, I don't know Theranos's cap table, but it's probably unlikely that her current stake in Theranos is worth $1B on paper even today - did she really manage to achieve a $9B valuation while holding onto 11% of her company?

txttran 11y ago
It says in the article that she has >50% equity.
- no_wave 11y ago
  I'm going to guess that these big name investors have liquidation preferences of at least 2x, meaning that her stake will probably be worth nothing once this all blows up even if the company maintains any value (and it probably won't anyways)
Animats 11y ago
Expect investor lawsuits against her personally. This goes way beyond business failure. It's unusual for a regulatory agency to bar the CEO from an industry, unless they're a crook.
lawnchair_larry 11y ago
Her current stake is irrelevant. She sure won't be selling it. It's only a question of what was already cashed out.

coderjames 11y ago

> back in the dot com boom this thing would have been held by mom and pop. Who also should have known better. If someone doesn't understand how a company they invest in makes a profit, or what the risks to that company are, they have no business investing in it. For example, I hold agency-MBS REITs in my portfolio, but only because I'm willing to read the quarterly filings and keep an eye on news relevant to interest rates. They are absolutely not an investment I would recommend to most people who want something simple they can "set and forget."

mortona 11y ago
No. Retail investors don't have the opportunity to scrutinize the company's records beyond what is publicly availbale, to take up references, or to meet with the management team. The VCs and funds investing in late-stage private companies do have these options. They can do as much, or as little, due-diligence as they like. And not just because they can demand things as a condition of the investment, but because it's perfectly reasonable to spend $50,000 on a couple of expert technical opinions when you're investing $1m+ but unfeasible if you're putting in $30k of life savings.