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The latest news in the Theranos saga is not good news for the remaining shareholders, nor the outstanding creditors.
In short, the company is finally winding down, with nearly all remaining employees being laid off at the end of last month. And with more debt than assets and cash, it looks like shareholders won't be getting anything back. The company is reportedly down to $5 million in cash, which isn't nearly enough to cover its debts.
Who Gets What?
It is being reported that the unsecured creditors will be left to split the remaining cash and company assets, with the exception of the company's IP. At the peak of Theranos's fundraising, it was valued at $9 billion, and the company actually raised more than $700 million.
Unfortunately, as everyone quickly learned, Theranos's value was built upon misrepresentations about the company's ability to make good on its promises of full spectrum blood tests from a single drop. When it was discovered that the company's technology did not work, the whole enterprise faltered. The company's founders and chief executives were criminally charged for fraud, as well as SEC violations.
The CEO and founder Elizabeth Holmes settled her SEC case for $500 million and a promise to never run another laboratory. Her partner in crime, and then-boyfriend, Ramesh Balwani, still has SEC charges hanging over him. The next federal court appearance for the pair is set for October 1.
For most casual observers of the Theranos debacle, it may feel a little bit reassuring to see the company finally dissolving given that it was on its way to luring a billion dollars out of investors without having a product/service that actually worked. The amount of litigation the company faced, and the criminal and SEC charges leveled at the founders and principal officers of the company (coupled with the fact the tech didn't work), really created the perfect storm for failure.
Hopefully, the failure of Theranos won't scare investors away from supporting the next company seeking to revolutionize the costly medical testing industry. Though it's nearly certain that investors are likely going to want to see a better, working, proof of concept, that's independently verified.