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23andMe has been in a deadlock for a while. - The CEO is effectively the control owner of the company, having 49% of the voting right. She has been trying to t

23andMe has been in a deadlock for a while. - The CEO is effectively the control owner of the company, having 49% of the voting right. She has been trying to take the company private for some time. - Last August, she proposed to buy all the outstanding shares at $8 per share. The board rejected. She installed a new board, and submitted her proposal again at $2.53 per share. The board rejected. She tried it a third time at $0.4 per share this month, and the board rejected. - Meanwhile 23andMe was losing $50M every quarter. So, unable to resolve the issue, the board choosed to enter into the bankruptcy process. I hope this relieves 23andMe from the corporate governance nightmare.

dehrmann 2y ago
Wouldn't be surprised if Wojcicki faces a class action suit over fiduciary responsibility.
- xyst 2y ago
  No point in doing this. Just enriches the lawyers. Then Wojicki just flees the country and skirts any responsibility.
  - jajko 2y ago
    Interpol warrant or similar is a powerful career and life crapper, most people prefer avoiding that and triple that for CEOs and their comfy global lifestyles.
linotype 2y ago
So rather than $8 a share they get zero? Sounds like the board was the one that messed things up.
- eightman 2y ago
  I assume the value of the remaining assets are worth more than $8/share and she was trying to get them for a discount.
  - merb 2y ago
    Shares are only worth what somebody wants to pay for them. Selling a ton of shares also often devalues them. Since the company was losing money, it was clear that the shares would drop.
    - canucker2016 2y ago
      Bloomberg's Matt Levine on the 23andMe situation: https://archive.is/zXqnB https://archive.is/zXqnB
      - merb 2y ago
        Yeah but he mostly analyzes his he relationship between the board and the ceo. Of course 8 usd was not so good at the time, but the stock was falling rapidly and everybody shorted the shit out of the company, even if the ceo would’ve sold its shares under no circumstances would they have gotten over 10 usd besides that the stock was higher
    - dtech 2y ago
      That's not true, shares are a share of the companies assets and future dividends. There are "scavengers" out there who buy a company if its assets are worth more than the market cap, close down the company or otherwise spin out the assets, and thus earn more than they paid for the shares.
      - marcus_holmes 2y ago
        > That's not true, shares are a share of the companies assets and future dividends. Possibly true 20 or 30 years ago, but now shares are speculative assets, their worth determined by what the market thinks they might be bought for by a greater fool.
        londons_explore 2y ago
        Only for companies who are profitable or might be profitable in the future. If the company has no chance at future profit, it becomes a simple share of assets. There are plenty of companies with assets only and no revenue or employees.
- pyrale 2y ago
  Just because your batna is shit doesn’t mean you should sign everything.
- nextts 2y ago
  What does $8/share value the company at?
- cloudbonsai 2y ago
  > So rather than $8 a share they get zero? Sounds like the board was the one that messed things up. The share was trading at $8-$9 at the time. The primary reason why the board has been rejecting the offer is that the CEO kept proposing discount prices to the market rate.
  - messe 2y ago
    By the sounds of it, the board is about to find out what the market rate really is.
    - eightman 2y ago
      I mean if it was trading at $8/share isn't the market rate $8/share?
      - piyuv 2y ago
        Liquidity matters
        ZeroTalent 2y ago
        This. The same thing is happening with Tesla stock. Since it's such a bit part of the S&P500, so half of retail investors buy it in their basket of portfolios and 401ks at trades at 10x it's worth on paper by looking at fundamentals.
        lotsofpulp 2y ago
        That reasoning would lead to concluding all the businesses in SP500 are traded at 10x their worth on paper. Or at least all the ones with market caps greater than Tesla. Edit, since I hit posting limit. To pooper: > Since it's such a big part of the S&P500 The conclusion is based on that premise, so any other business that satisfies that premise should also lead to the same conclusion. To llm: > I think their point is that businesses at the top of the S&P500 are traded at sentiment and momentum based values that are pretty disconnected from a logical P/E I have read the same about other businesses many times. There is nothing logical about only using P/E as a factor in determining price (or “worth”). No one knows the future, so even a price derived from an arbitrary standard of P/E is a “sentiment and momentum based” value.
- phire 2y ago
  Not zero; In all bankruptcies, the shareholders get whatever is left over after liquidating all company assets and paying back all creditors. In most high-profile bankruptcies, there aren't enough assets to even finish paying creditors, yet alone creditors. However, this is a voluntary Bankruptcy, so there might actually be assets left over to pay out to shareholders.
  - addicted 2y ago
    Which is still gonna be significantly worse than the $8/share offered. If the value of assets after paying off debtors is > $8/share, then that’s the easiest arbitrage opportunity considering it’s currently trading at $1.80. Just buy the whole thing for $3/share (an irrefutable premium of 67%), shut down operations entirely, pay off the creditors, and pocket the net assets of > $8/share and more than double your money almost instantly. If the claim is the CEO ran it into the ground then the board messed up even worse by not replacing the CEO.
    - lazide 2y ago
      For this reason I’ve never heard of a stock which is selling at less than assets minus debts for very long. It’s an easy hostile takeover + fire sale situation. So I’m doubting that is what is really happening here?
      - manquer 2y ago
        It does happen for many reasons and not uncommon, uncertainty and risk is typically why. There isn’t one single value, value derived ( let alone perceived) is subjective In this case, The stock is worth more(or less) to the 49% shareholder than others who are may value the founder holding defacto controlling stake negatively, thus discount the stock less than its book value . This is also why sometimes same class of shares held by different people get priced (i.e. valued) differently in a single deal. Recently the paramount one is a good example . Another famous example Yahoo was valued negatively for a long time before its sale to Verizon, I.e. its market cap was less than the value of its alibaba holdings . One off events like county cases , drug trials likelyhood of a merger approval from regulators are hard to price accurately and can skew.
- shreyshnaccount 2y ago
  board probably thinks the assets remaining after the bankruptcy pays off the creditors is more than the $8/share?
- danesparza 2y ago
  If they declare bankruptcy, then the creditors get first pick over assets. Several board members might be creditors.
  - FuriouslyAdrift 2y ago
    This right here... finance 101
EGreg 2y ago
Wait, if they declare bankruptcy can’t they be bought at a fire sale by this CEO’s friends finally?
- paulddraper 2y ago
  Yes. And that often happens.
- blerb795 2y ago
  No need for the friends to be involved -- she resigned prior the the bankruptcy filing so she can participate in the bidding process personally
rwmj 2y ago
Couldn't she just buy 2% of the company at the market price?
- paulddraper 2y ago
  Yes but she will still have to abide by the covenants. And those might include things preventing majority owner from buying everything at $0.01 per share.
- robertlagrant 2y ago
  It might not be possible if there are tagalong/dragalong agreements. And from the perspective of a shareholder, the shares might become a bit of a riskier proposition if you allow her to control the company, vs the current status quo.
knowitnone 2y ago
There's a conflict of interest for a CEO to take the company private. They have a incentive to lower the share price as much as possible so they can purchase shares. Looking at you, Dell.
LarsDu88 2y ago
This was a handpicked board too. She could've veered harder into picking cronies.
dkkergoog 2y ago
[dead]

dehrmann 2y ago

Wouldn't be surprised if Wojcicki faces a class action suit over fiduciary responsibility.

xyst 2y ago
No point in doing this. Just enriches the lawyers. Then Wojicki just flees the country and skirts any responsibility.
- jajko 2y ago
  Interpol warrant or similar is a powerful career and life crapper, most people prefer avoiding that and triple that for CEOs and their comfy global lifestyles.

linotype 2y ago

So rather than $8 a share they get zero? Sounds like the board was the one that messed things up.

eightman 2y ago
I assume the value of the remaining assets are worth more than $8/share and she was trying to get them for a discount.
- merb 2y ago
  Shares are only worth what somebody wants to pay for them. Selling a ton of shares also often devalues them. Since the company was losing money, it was clear that the shares would drop.
  - canucker2016 2y ago
    Bloomberg's Matt Levine on the 23andMe situation: https://archive.is/zXqnB https://archive.is/zXqnB
    - merb 2y ago
      Yeah but he mostly analyzes his he relationship between the board and the ceo. Of course 8 usd was not so good at the time, but the stock was falling rapidly and everybody shorted the shit out of the company, even if the ceo would’ve sold its shares under no circumstances would they have gotten over 10 usd besides that the stock was higher
  - dtech 2y ago
    That's not true, shares are a share of the companies assets and future dividends. There are "scavengers" out there who buy a company if its assets are worth more than the market cap, close down the company or otherwise spin out the assets, and thus earn more than they paid for the shares.
    - marcus_holmes 2y ago
      > That's not true, shares are a share of the companies assets and future dividends. Possibly true 20 or 30 years ago, but now shares are speculative assets, their worth determined by what the market thinks they might be bought for by a greater fool.
      - londons_explore 2y ago
        Only for companies who are profitable or might be profitable in the future. If the company has no chance at future profit, it becomes a simple share of assets. There are plenty of companies with assets only and no revenue or employees.
pyrale 2y ago
Just because your batna is shit doesn’t mean you should sign everything.
nextts 2y ago
What does $8/share value the company at?
cloudbonsai 2y ago
> So rather than $8 a share they get zero? Sounds like the board was the one that messed things up. The share was trading at $8-$9 at the time. The primary reason why the board has been rejecting the offer is that the CEO kept proposing discount prices to the market rate.
- messe 2y ago
  By the sounds of it, the board is about to find out what the market rate really is.
  - eightman 2y ago
    I mean if it was trading at $8/share isn't the market rate $8/share?
    - piyuv 2y ago
      Liquidity matters
      - ZeroTalent 2y ago
        This. The same thing is happening with Tesla stock. Since it's such a bit part of the S&P500, so half of retail investors buy it in their basket of portfolios and 401ks at trades at 10x it's worth on paper by looking at fundamentals.
        lotsofpulp 2y ago
        That reasoning would lead to concluding all the businesses in SP500 are traded at 10x their worth on paper. Or at least all the ones with market caps greater than Tesla. Edit, since I hit posting limit. To pooper: > Since it's such a big part of the S&P500 The conclusion is based on that premise, so any other business that satisfies that premise should also lead to the same conclusion. To llm: > I think their point is that businesses at the top of the S&P500 are traded at sentiment and momentum based values that are pretty disconnected from a logical P/E I have read the same about other businesses many times. There is nothing logical about only using P/E as a factor in determining price (or “worth”). No one knows the future, so even a price derived from an arbitrary standard of P/E is a “sentiment and momentum based” value.
phire 2y ago
Not zero; In all bankruptcies, the shareholders get whatever is left over after liquidating all company assets and paying back all creditors. In most high-profile bankruptcies, there aren't enough assets to even finish paying creditors, yet alone creditors. However, this is a voluntary Bankruptcy, so there might actually be assets left over to pay out to shareholders.
- addicted 2y ago
  Which is still gonna be significantly worse than the $8/share offered. If the value of assets after paying off debtors is > $8/share, then that’s the easiest arbitrage opportunity considering it’s currently trading at $1.80. Just buy the whole thing for $3/share (an irrefutable premium of 67%), shut down operations entirely, pay off the creditors, and pocket the net assets of > $8/share and more than double your money almost instantly. If the claim is the CEO ran it into the ground then the board messed up even worse by not replacing the CEO.
  - lazide 2y ago
    For this reason I’ve never heard of a stock which is selling at less than assets minus debts for very long. It’s an easy hostile takeover + fire sale situation. So I’m doubting that is what is really happening here?
    - manquer 2y ago
      It does happen for many reasons and not uncommon, uncertainty and risk is typically why. There isn’t one single value, value derived ( let alone perceived) is subjective In this case, The stock is worth more(or less) to the 49% shareholder than others who are may value the founder holding defacto controlling stake negatively, thus discount the stock less than its book value . This is also why sometimes same class of shares held by different people get priced (i.e. valued) differently in a single deal. Recently the paramount one is a good example . Another famous example Yahoo was valued negatively for a long time before its sale to Verizon, I.e. its market cap was less than the value of its alibaba holdings . One off events like county cases , drug trials likelyhood of a merger approval from regulators are hard to price accurately and can skew.
shreyshnaccount 2y ago
board probably thinks the assets remaining after the bankruptcy pays off the creditors is more than the $8/share?
danesparza 2y ago
If they declare bankruptcy, then the creditors get first pick over assets. Several board members might be creditors.
- FuriouslyAdrift 2y ago
  This right here... finance 101

EGreg 2y ago

Wait, if they declare bankruptcy can’t they be bought at a fire sale by this CEO’s friends finally?

paulddraper 2y ago
Yes. And that often happens.
blerb795 2y ago
No need for the friends to be involved -- she resigned prior the the bankruptcy filing so she can participate in the bidding process personally

rwmj 2y ago

Couldn't she just buy 2% of the company at the market price?

paulddraper 2y ago
Yes but she will still have to abide by the covenants. And those might include things preventing majority owner from buying everything at $0.01 per share.
robertlagrant 2y ago
It might not be possible if there are tagalong/dragalong agreements. And from the perspective of a shareholder, the shares might become a bit of a riskier proposition if you allow her to control the company, vs the current status quo.

knowitnone 2y ago

There's a conflict of interest for a CEO to take the company private. They have a incentive to lower the share price as much as possible so they can purchase shares. Looking at you, Dell.

LarsDu88 2y ago

This was a handpicked board too. She could've veered harder into picking cronies.

dkkergoog 2y ago

[dead]