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So there have been several suits from investors / lenders at this point. I read earlier an interesting point that these suits are essentially Theranos' investor
by Naritai 10y ago
So there have been several suits from investors / lenders at this point. I read earlier an interesting point that these suits are essentially Theranos' investors & bondholders for priority in the inevitable bankruptcy.
Because in a bankruptcy judgments are given priority over debt, if you holding Theranos' debt you can try to jump to the front of the line by suing for fraud (etc), in the hopes that you can get a judgement in your favor.
So the real takeaway is, it seems all these companies have concluded that bankruptcy is inevitable.
- revelation 10y agoIt's either that or the investor feels they have been defrauded.
- Naritai 10y agoTrue! But they're filing the suits in the full knowledge that the existence of the suit itself will reduce the value of their holdings. So they must not be very optimistic about the future value of their investment.
- erikpukinskis 10y agoNo, it just means they think the suit will decrease the value of their investment less than they stand to win.
- jpeg_hero 10y agoI think not bankruptcy... It's been reported that Theranos still has $400M in cash. And the founder has majority control. So this is a very rare condition, where there is still assets in the company (so a judgement can be paid) but the company has no business plan. So you have a founder who's best play now is sit around for the next 10 years spending down that $400M on new business plans to see if something hits.
- dekhn 10y agoIt seems unlikely Ms. Holmes is going to have the opportunity to pursue that strategy. She has been personally banned from running a diagnostic facility, her company is being sued for fraud, and pretty much all their claims have vanished in smoke. Who would buy a product with a company with a history like that?
- mimimimi4 10y agoBefore Nov. 8 I would have said the same thing but now I will say that at least half of America. I'm being serious. And if you disagree with me FU, Trump won, this is the new normal.
- Naritai 10y ago400M isn't that much. Per Glassdoor Theranos has 790 employees; assuming that was before layoffs and the numbers in the news (~340 layoffs) are accurate, that's 450. Since it's an R&D company in Palo Alto, average total comp is likely north of $250k per person, but even at that it's $110M a year in payroll alone. And medical research isn't exactly cheap, I bet it easily spends over $100M in research costs. So at that burn rate Theranos has 2 years to keep the lights on. It takes more than 2 years for a medical company to bring a new product to market. Go ahead, halve all my numbers and argue that Theranos actually has a burn rate of 4 years: It still doesn't matter, there is no way they'll get something through the FDA (especially given recent history) in 4 years.
- ghaff 10y agoHonest question. Why isn't the board just shutting everything down rather than let it continue to burn through cash? Are there sufficient insiders tin whose interest it is to continue their payday?
- bosdev 10y agoI believe the founder has a controlling interest. The board can't do much without her say so.