7 ms·

I 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, w

I 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 ago
It 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 ago
  Before 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 ago
400M 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 ago
  Honest 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 ago
    I believe the founder has a controlling interest. The board can't do much without her say so.
    - SomeStupidPoint 10y ago
      I was on a small company board, was an officer, and was the (vast) majority shareholder, at least for voting rights. Technically, the board could have fired me, and it would taken something like 2 or 3 months to have forced my way back on. (Calling a major shareholder meeting to elect the board out of cycle, plus calling a new board meeting to vote myself in, takes time and organization.) The political cost of overruling the board in that manner also wouldn't be null for me, and likely would've caused key staff to quit and key backers to stop supporting the project. I definitely would have had to do a lot of explaining for such a power play, and it's likely my reputation never would recover at the company. As a lot of kings have learned: your word may be law, but nobles pay the taxes, provide the swords, etc. You can't make enemies of everyone.
  - kooshball 10y ago
    Board can't make that decision if the CEO has majority voting rights.
    - nerfhammer 10y ago
      Honest question: what's the point of having a board then?
      - CPLX 10y ago
        To represent the owners of the company. The founder is over half the owner of the company. So the system is working as intended. In all fairness, though generally lawsuits represent a failure on some level, this kind of situation is kind of why we have courts. That's a proper venue to determine what to do next in this unusual and extraordinary situation.
iaw 10y ago
I expect their debts to run into the multiple-billions.
ChuckMcM 10y ago
One judgement could wipe that out, especially if it was eligible for treble damages.
trhway 10y ago
>the company has no business plan. i'd not say so. Originally they tried to sell their tech to DoD (in 2012), and Mattis, a 4 star general back then, was the key figure in trying to push the deal through (no surprise that he ended on their board :). Given that he may become new defense secretary under Trump this old plan becomes new and shiny again. Also consider how FDA actions toward Theranos may be spun out in the new political regime as an example of egregious regulation overreach strangulating revolutionary innovations and entrepreneurship ... So Theranos need to survive only until the January 21st.
nihonde 10y ago
It isn't at all rare for a bankrupt company to have many millions, even billions, in assets. It might be more unusual to have hundreds of millions in cash on hand, though.

dekhn 10y ago

It 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 ago
Before 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 ago

400M 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 ago
Honest 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 ago
  I believe the founder has a controlling interest. The board can't do much without her say so.
  - SomeStupidPoint 10y ago
    I was on a small company board, was an officer, and was the (vast) majority shareholder, at least for voting rights. Technically, the board could have fired me, and it would taken something like 2 or 3 months to have forced my way back on. (Calling a major shareholder meeting to elect the board out of cycle, plus calling a new board meeting to vote myself in, takes time and organization.) The political cost of overruling the board in that manner also wouldn't be null for me, and likely would've caused key staff to quit and key backers to stop supporting the project. I definitely would have had to do a lot of explaining for such a power play, and it's likely my reputation never would recover at the company. As a lot of kings have learned: your word may be law, but nobles pay the taxes, provide the swords, etc. You can't make enemies of everyone.
- kooshball 10y ago
  Board can't make that decision if the CEO has majority voting rights.
  - nerfhammer 10y ago
    Honest question: what's the point of having a board then?
    - CPLX 10y ago
      To represent the owners of the company. The founder is over half the owner of the company. So the system is working as intended. In all fairness, though generally lawsuits represent a failure on some level, this kind of situation is kind of why we have courts. That's a proper venue to determine what to do next in this unusual and extraordinary situation.

iaw 10y ago

I expect their debts to run into the multiple-billions.

ChuckMcM 10y ago

One judgement could wipe that out, especially if it was eligible for treble damages.

trhway 10y ago

>the company has no business plan. i'd not say so. Originally they tried to sell their tech to DoD (in 2012), and Mattis, a 4 star general back then, was the key figure in trying to push the deal through (no surprise that he ended on their board :). Given that he may become new defense secretary under Trump this old plan becomes new and shiny again. Also consider how FDA actions toward Theranos may be spun out in the new political regime as an example of egregious regulation overreach strangulating revolutionary innovations and entrepreneurship ... So Theranos need to survive only until the January 21st.

nihonde 10y ago

It isn't at all rare for a bankrupt company to have many millions, even billions, in assets. It might be more unusual to have hundreds of millions in cash on hand, though.