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Theranos’ Letter to Shareholders Shows the Company Is on Its Deathbed
- olliej 9y agoI continue to be amazed that in spite of everything that has happened there is still a company that is operating...
- gravis7777 9y agoHow long until she is out on a book and lecture tour, and on new company boards making millions?
- pb 9y agoMy guess is never. I can't imagine any company that would want her on their board.
- mtgx 9y agoI used to think the same way about Condoleezza Rice.
- kristianc 9y agoI wouldn't rule that out. Martha Stewart survived a stint in prison.
- positr0n 9y agoYeah but insider trading is different than fraud. The line is blurry, but I'm sure everyone at that level has some level of inside knowledge they have traded on at one time or another. Holmes on the other hand was directly defrauding investors, why would you want her on an executive team/board trying to get investments?
- scarmig 9y agoBecause she's a proven executor on defrauding investors?
- vkou 9y agoThe problem with insider trading is that it creates perverse incentives. It, in itself, does not necessarily defraud. If I work for Apple, and I sneak a glance at their balance sheet, and short its stock, I did not rob APPL shareholders. It's still illegal, and insider trading (Because otherwise, I'd have an incentive to actively sink the company, while benefiting from a short.)
- celim307 9y agoMartha Stewart actually created products, and was good at it
- pb 9y agoThere is no comparison between the two. Martha Stewart was running a real business and made the mistake of talking to police without a lawyer -- that's very different from running a giant sham operation that defrauded many.
- deleted 9y ago[deleted]
- oh_sigh 9y agoThe mistake she made was not that she talked to police without a lawyer, but that she lied to investigators. Yes, I'm sure the lawyer would not have let her make up those lies, but it's not like she just behaved well and got railroaded some how. And I never understood why she lied in the first place. If your paid broker gives you a tip that a CEO is dumping his shares, are you not allowed to act on it?
- emiliobumachar 9y agoSome interrogators are really good at phrasing and intoning a question making it seem like they're inquiring about something very wrong, worth trying to cover up, e.g., "you didn't have any information about XYZ selling his shares, did you?" It shouldn't work if the target is thinking straight, but the whole point is to trigger a knee-jerk emotional reaction.
- oh_sigh 9y agoMartha Stewart wholesale lied by saying that she and her broker had a pre-set price point of $60 for when to dump ImClone. That part is completely fabricated by Stewart. It's impossible to mess up 'My stock broker told me CEO was dumping his shares' with 'We agreed to sell at $60'
- rtx 9y agoHenry Kissinger was on Theranos board. I don't think she is worse.
- AlexCoventry 9y agoKissinger might be a lesser human being than her, but he made a lot of people very rich, and has enormous political clout. (E.g., he was the initial chair of the 9/11 commission, when the Bush administration was still trying to cover it up.) http://www.cnn.com/2002/ALLPOLITICS/12/13/kissinger.resigns/ http://www.cnn.com/2002/ALLPOLITICS/12/13/kissinger.resigns/
- probably_wrong 9y agoNot only did she raise a lot of money and good PR without a product, but she also kept the company running for so long that it's almost old enough to drink. I can definitely imagine worse CEOs on a board. I mean, sure, the truth eventually came out. But I doubt "honesty" is at the top 10 priorities of most big companies.
- tomkarlo 9y agoYes, but she did so in part by using fraud and deception. When you're an early stage company trying to raise money from investors there's a large component of "trust us to do the right things with your money" that is going to be hard to sell investors with her on the board.
- sigstoat 9y agowell, she can't be a director or officer of a publicly traded company for 10 years, per her agreement with the SEC. i guess a privately held company could pick her up, but when you've got that sort of thing hanging over your head, you're not exactly going to instill a lot of confidence.
- JimboOmega 9y agoRight, but... Isn't she still an officer of Theranos? I guess that's the only company she's allowed to run? I don't quite get it.
- dragonwriter 9y agoTheranos is not a public company.
- txsh 9y agoFuture Hacker News comments when Holmes peddles her new scam: “You cannot hold that against her.” “Most entrepreneurs experience failure.” “She was fined by the SEC. What are you complainig about?” “I’m sure she’s learned from her mistakes.”
- ada1981 9y agoMaybe she could take over Facebook?
- legostormtroopr 9y agoYou forgot: "A male entrepreneurs wouldn't be held to this standard, don't be so sexist."
- nerdymanchild 9y agoWe get it. Theranos is finally suffering through fate it deserved in the first place. Justice is happening. Serious question, is this news or tabloid at this point?
- saagarjha 9y ago> This letter and its contents are confidential. We request that you not share or discuss this letter with others, except your attorneys, accountants and other advisors bound by confidentiality obligations. The unauthorized disclosure of this letter could violate the terms of agreements between you and the company, and could additionally depress the amount realizable upon a sale of our assets. So much for that clause
- deleted 9y ago[deleted]
- deleted 9y ago[deleted]
- smallgovt 9y agoMy guess is the letter was purposefully leaked to increase exposure to potential financiers.
- NelsonMinar 9y agoThis whole article is about a fantasy where someone would loan $10M+ more to Theranos or make another investment. Is there any chance of that happening at all?
- scarmig 9y agoIs it any more a ridiculous fantasy than Theranos raising a billion dollars in the first place?
- fapjacks 9y agoUnderrated posts of the century.
- AlexCoventry 9y agoI'm pretty sure a Theranos cryptocurrency could raise $10M on name recognition alone.
- verandaguy_alt 9y agoAsking as someone less involved in reading about the funding side of starts than probably many of you, can someone explain this quote? >The most viable option that we have identified to forestall a near-term sale or a potential default under our credit agreement is further investment by one or more of you. Surely, the company can't in earnest expect any more VC or angel funding after their most recent round of layoffs, right? Is it common for startups to ask for funding when it's very clear that the company is in such bad shape, with very little chance of recovery?
- taurath 9y agoI imagine it’s kind of a form thing - “how could this be mitigated?” When there’s a fat chance of that ever happening, or some IP the investor might want to buy perhaps.
- jjallen 9y agoYes, it is common to basically ask for funding until the last minute. The fact that Fortress already gave them some funding, at arguably the "last minute" is evidence of this. Fortress, you will note, was probably more of a vulture investor than venture investor here.
- verandaguy_alt 9y agoI haven't heard of vulture investors before. Is this just someone who aims to profit from an eventual asset sale (somehow)?
- celticninja 9y agoI think it is someone who comes in late, when the company is already in trouble and uses this to leverage a preferential deal.
- deleted 9y ago[deleted]
- mzs 9y ago
- artursapek 9y agoI still don't see how this woman is not in federal prison.
- kevinskii 9y agoStay tuned. The investigation is still ongoing. The bar for a criminal conviction is a lot higher, so it takes a while longer.
- kristianc 9y agoTLDR: 'We've thrown so much of our investors money into a bottomless pit that now our only option is to ask for some more.'
- dexcs 9y agoIf it's true that they own about 1k patents it may look like a sweet deal for some big pharma corporation to buy the whole company and shut it down. Thats the only small light on the horizon imho...
- arbuge 9y agoThe optics of that deal might not look that good for the buyer though. Essentially you'd be buying a fraud.
- elliottcarlson 9y agoWould Fortress Inv. get the patents if the loan is defaulted on? And in that case, wouldn't they be buying from them instead of outright from Theranos?
- dhimes 9y agoI don't get how Holmes is still CEO. I really don't get that.
- untangle 9y agoProbably because the Board can't find anyone better to take over this sinking, toxic ship. Sometimes it's just that simple.
- rainieri 9y agoMaybe Shkreli when he comes back from jail.
- dragonwriter 9y ago> Probably because the Board can't find anyone better to take over this sinking, toxic ship. Well, not without paying them cash money that they don't have. I can't imagine anyone taking an equity-heavy compensation package.
- charlesdm 9y ago
- dalacv 9y agoThis is like the last few rounds of a game of Monopoly where the losing opponent tries just about anything (including begging for money) to stay in the game as long as possible.
- vhost- 9y agoOr Magic: The Gathering. Let me just look at my hand just a few more times. Surely there's a response to this!
- fapjacks 9y agoFound the FNM player.
- emiliobumachar 9y ago?
- fapjacks 9y agoFNM is where all the Pro Tour wannabes go to 11. It's why your LGS is packed for Monday Night Modern but can't get eight people to show up to make a top 8 list for FNM. If they don't scoop out of frustration, they'll stare at their hand looking for cards that aren't there.
- vhost- 9y agoMore like commander at the dive bar.
- fapjacks 9y agoHah! You know I really sat for a minute staring at my response thinking about changing it to "new commander player" but decided not to.
- manishsharan 9y agoOn a completely different topic , would you know of other high profile young women entrepreneurs in tech and biotech who can serve as role model for girls/high-school kids ?
- deleted 9y ago[deleted]
- uerobert 9y agoAnne Wojcicki
- aj7 9y agoInvestors are warned that there are all sorts of ways that Theranos could be run as a zombie company, for the benefit of insiders, once no further investment appears. New investment would add to that zombie concern, not fund a going concern. The company has had enormous funds at its disposal to invent a blood analyzer using very small blood samples, and has failed. This technical failure is primary; Holmes et al’s misdeeds and Rasputinizations form a superimposed soap opera for authorities to sort through. What’s next is the auction.
- whatshisface 9y agoThe superimposed soap opera probably contributed to the failure of the scientists to invent anything. Without the institutional craziness, all of that money and all of that brainpower would have ended up in something.
- radicaldreamer 9y agoAfter the first set of lies about hit-milestones/sales, it bacame impossible to not invent droplet blood tests.
- rossdavidh 9y ago"Rasputinizations" is an awesome word, something good came out of all this.
- handsomechad 9y agocan someone try to define what it means in this context. i'm reading about rasputin but not sure. Thank you.
- ionised 9y agoSeems to be it means Holmes and company were acting like snake-oil salesmen, much like Rasputin and his 'spiritual healing'.
- sudomake 9y agoCan someone explain the 3 million minimum liquidity threshold? Is it supposed to be a kind of bankruptcy precaution for the lender? "Were going to lend you X million, but its really only (X-3) million because you must hold on to the other 3 million at all times"
- patio11 9y agoIt’s a loan covenant. They’re very common in a variety of commercial transactions; that particular requirement (you must maintain a minimum level of cash on hand) is relatively common. It’s really $X million, not $X minus 3 million, because you should have $3 million from any source other than them (e.g. revenue) and failure to have it represents mismanagement. This particular covenant does not provide material downside protection to the lender; it’s more designed to prevent an aggressive company from riding things too close to the knife’s edge. There would often exist parallel covenants about borrowing money, assigning assets, increasing management salaries, paying dividends, etc. (Father worked in commercial real estate; lenders have to get increasingly creative when a borrower’s situation is closer to the brink, which is where I learned about these.)