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Forbes Just Cut Its Estimate of Theranos CEO Elizabeth Holmes's Net Worth From $4.5 Billion To Zero (qz.com)
It wasn't long agon when Elizabeth Holmes, the founder and CEO of Theranos, was regarded as one of the U.S.'s most successful female entrepreneurs with Forbes estimating her net work to be $4.5 billion. Thanks to all the evidence that Theranos' technology is largely a gimmick and false advertising, the publication has revised that figure to essentially zero, reports Quartz. From the report: Last year, Forbes pegged its value at $9 billion, based on the sale of stakes to investors. Since that lofty estimate, Theranos has been battered by bad news (paywalled; alternate source), starting with reports in the Wall Street Journal in October that its tests were inaccurate. That triggered an inquiry from the federal Centers for Medicare and Medicaid Services, which proposed banning Holmes from the industry. Forbes went back to its slide rule and, after talking to venture capitalists and industry experts, recalculated Theranos' value at $900 million, based on its intellectual property and money it has already raised. "At such a low valuation, Holmes' stake is essentially worth nothing," Matt Herper writes. That's because Theranos' other investors own preferred shares, and since Holmes owns common shares, they would get paid first if the company were forced to liquidate.
The $900M is the value of the COMPANY, not her net worth. They figure the only way to get value out of the company is to liquidate it, and she would get almost none of the proceeds. So HER net worth is $0.
What she owns are shared, and if her shares are not preferred, when the company declared bankruptcy what will happen is that all its assets will be liquidated and preferred investors paid first. Nothing will be left for her because of that. Therefore, her net worth is zero.
The argument is that she owns ordinary shares, and while those shares might be kinda sorta worth $100-200M on paper (I can't be bothered to do the calculations...) the reality is she can't sell them (the price would tank if she tried) and if the company goes bankrupt, and Forbes thinks it's very, very, likely it will, then as an ordinary shareholder she'll be last in line to get paid. Bondholders, preferred stock holders, and even the credit card company are ahead of ordinary shareholders when it comes to being paid back after a company is liquidated.
You are not alone. This is not normal. None of this is normal.
That's the valuation of the company. If the editors had made it easier to get the the ACTUAL news report, you could see the explanation, which is that because of the way the investors are paid off before she is, her stake is what's now presumed to be worthless.
http://www.forbes.com/sites/ma...
$900M isn't Holmes' net worth; it's the entire net worth of Theranos as a company. Last line of the summary is a bit confusing but what it's saying is that if the company were forced to liquidate all current assets, Holmes would be among the last to get paid. Other investors in the company with preferred shares would be paid first. By the time it gets to the point where Holmes could legally be paid from the liquidation, it's more than likely there'd be nothing left for her to get.
It's an interesting question: how come so many of these "successful females in IT" are just charlatans? For another example the ex-CEO of Reddit, married to an extremely unscrupulous gay man.
Perhaps they view technology as a "social construct"? That's quickly turning into a dog-whistle word for a con-man. Or con-woman, whatever.
Rough numbers:
She owns 45% of the company
45% of 9B = 4B
But...someone else invested 1B, and they have rights to the first 1B in a sale.
If the company is only worth 900M, then all of that 900M is allocated to the investor first, and she get $0.
I'm surprised that it has that high a value at all, given that their legal and accounting expenses must be tremendous (even if they were somehow to win every lawsuit against them) and their liability insurance provider is doubtless going to fight them over every single claim.
The real question is whether Holmes was as good at deceiving herself as she was at deceiving others. If she was, her net worth may indeed be limited to personal property (which certainly she'll get to keep since it's very difficult to confiscate personal property from the wealthy), but if she was aware of just how much of it was all smoke and mirrors, then I'm sure she found ways to hide as much as she could.
What she really needs to do is declare that she's found religion, write a book, and then become a talk show guest.
Whatever happened to the value of good honest labour?
It got bought out by Angel VC's in Silicon Valley.
SJW's don't eliminate discrimination. They just expropriate it for themselves.
Mod me down if you wish but I gotta say...All slashdotters seem to do these days is hate, she's actually trying to do something to help the world.
For example, here's an image of her developing an estimation mechanism for calculating the girth of penises, a sorely needed tool that she had a hand in developing for the porn industry:
https://www.epo.org/learning-events/european-inventor/finalists/2015/holmes/HolmesGallery1.jpg?lenya.module=svg&height=371&width=556
So the real question is how many slashdotters can make a claim to inventing something as innovative as that? Not many I suspect.
Bernie's trying to make it $15/hr.
Replaced by 3rd world commodity labor. Soon to be replaced by robots.
"Prediction: within 10 years, Windows will be a Linux distribution." Me, 7-6-2016
The original article was essentially bullshit, using people who worked at Theranos for 2 weeks 5 years ago as "internal sources", and debunking claims that Theranos never made. What they did was like posting a story saying that the Linux kernel doesn't "truly" prevent computers from being infected by viruses (a claim nobody ever made) and that the GNU didn't it grant it a GPLv3 license.
I don't know if this total incompetence or if there's a hidden agenda, or maybe it is in fact a case of blatant sexism, but the coverage of Theranos by the Wall Street journal is awful and careless. And the other big media gobbled this up without thinking twice about it.
There was a video interview of Holmes by some grinning moron from the WSJ posted on Slashdot a while ago. Anyone watching that video could see that this whole story is essentially sensationalistic reporting with no basis in reality. But who cares about facts, it's much easier to call that girl a crook and move on to the next scandal.
I actually cancelled my Audible subscription to the WSJ after watching that interview and doing my own research into this story. Who knows what proportion of their stories are full of bullshit like this one. They remind me of that guy from the movie Shattered Glass.
Hi, Liz. Why did you make up this "lucm" name?
Do you have ESP?
What I don't get is did no one bother to see if her so-called game changing blood tests actually WORKED? I get the impression, no
I'm just kind of dumbfounded that no one thought to check with some actual PhDs, MDs, researchers, etc.
'The unexamined life is not worth living' - Socrates
Yeah total bullshit.
After all, the Centers for Medicare and Medicaid Services haven't proposed pulling Theranos's license (and hence qualification to do tests that can be reimbursed by Medicare and Medicaid), and haven't proposed banning the Theranos founders from running a lab for two years. Oh, wait, they did. http://www.nytimes.com/2016/04...
After all, the company didn't just throw out all the results done on their machines in 2014 and 2015. Oh, wait, they have. http://www.wsj.com/articles/th...
I have no common cause with the Libertarian neanderthals around here that clearly despise and fear women, but in this case, Theranos looks like little more than a scam. But I wouldn't like that to the CEO being a female, since there are no lack of male-run scam outfits who are briefly market darlings before it's revealed that the company's core technology is a load of unmitigated bullshit.
The world's burning. Moped Jesus spotted on I50. Details at 11.
They're actually relevant to the story here!
Please, no Forbes links. I tried to read a Forbes article, and they insisted that I whitelist their site. So I did, and the very first page was filled with blinking and flashing ads. Bad behavior should not be rewarded, so no links to Forbes.
The original article was essentially bullshit
If true, then Theranos could quickly debunk their BS by publicly demonstrating their technology in front of credible experts. Please explain why they haven't done that.
Like my granddad used to say "Working hard at being stupid is much less valuable than half-assing being smart."
Of course, he also warned me to never trust a kraut or jap, so take it for what it's worth.
SJW's don't eliminate discrimination. They just expropriate it for themselves.
So Theiranus was full of shit?
More likely it's the fact that Silicon Valley is a liberal/SJW stronghold, where investors will happily throw money at any company with a female CEO.
As we say in California, what are smoking and where can I get some?
http://valleywag.gawker.com/silicon-valley-named-13th-best-conservative-city-in-ame-1458838034
They never claimed that the lab tests they conducted on their own machines (that they've now thrown out and told doctors to disregard) were accurate?
The dead giveaway on Theranos is the splurging of publicity in mass mainstream media without anything at all published in relevant peer-reviewed specialist journals.
As soon as anyone asks why they would do that, the answer is obvious. You'd think.
Aberrations have appeared in my destiny prognostication engine!
More likely it's the fact that Silicon Valley is a liberal/SJW stronghold, where investors will happily throw money at any company with a female CEO.
As we say in California, what are smoking and where can I get some?
http://valleywag.gawker.com/silicon-valley-named-13th-best-conservative-city-in-ame-1458838034
GAWKER?!?!?!?!
Yeah, that's a trustworthy source.
Jesus H. Fucking Christ, you scraped right through the bottom of the barrel.
She owns 50% of the company. This is the poster child for diversification of the portfolio.Theranos is private so the stock is only as valuable as the next private market buyer will pay.
Preferred investors get paid first. She only has common stock. So, nothing left for her no matter how much of the company she owns.
She arrived early, stayed late, and worked through the weekends. Her tech may have failed, but it wasn't because of a lack of hard work.
You know that is actually characteristic behavior of financial fraudsters. They avoid delegating large numbers of essential tasks because they don't want others seeing the books and asking questions. They like to be the first there and last to leave to make sure nobody is nosing around too. Finally they like taking care of certain transactions with third parties over weekends and after hours were things get done 'out of process' and it may be possible to evade some other normal checks and controls.
Its actually considered a good anti-fraud practice to have anyone who handles accounting or inventory to take a least one mandatory five consecutive business day vacation each year! That way someone else has to perform at least some of their job functions for a time and there is a second pair of eyes on things. It also may cause some schemes where things have to be kept in constant motion like 'lapping' to fall apart.
A fraud investigator would consider her 'work ethic' here a reason to be more suspicious not less.
Repeal the 17th Amendment TODAY! Also Please Read http://www.gnu.org/philosophy/right-to-read.html
Did you read the articles? I don't know why I even bother with this because people are not looking for what this is all about, they're just out for blood like with that fucking gorilla that got killed.
The first article you post has nothing to do with Theranos using an unproven technology. It's essentially an internal letter (not an actual decision) citing issues with lab procedures for a specific incident. None of the R&D stuff at Theranos is related to Medicare coverage.
The second one is just a follow-up from the same bullshit WSJ article that keeps bashing the old prototype (that Edison machine) for things Theranos never claimed it did. It doesn,t bring up new facts at all.
I did read the articles. How you could honestly think that it's not a big deal if a company whose core purpose is doing blood tests has admitted that the tests they've done aren't reliable, and is facing being barred from doing work for the largest customer for blood test services in the country, then I really don't know what to tell you.
Theranos claimed that their Edison machine (the core of their business) accurately performs blood tests with less blood and at lower cost than competing devices. That's turning out not to be true, at least on the accuracy front. If you don't think accuracy is important, then I've got a ballpoint pen here on my desk. It can perform blood tests using no blood at all, and at trivial cost. Can't vouch that they'll be accurate, though...
There's a difference between "value" and "price". The "value" of gold remains nearly constant due to comparatively little change in demand and supply. It's the "price" of gold, when measured in a non-gold currency like the US Dollar, which varies. That variance is due to the "value" of the USD fluctuating due to its demand, but mostly its supply, being far more volatile and not being fixed like gold's is. That's why gold is often referred to as the ultimate store of "value"; its "value" doesn't change much, even if the nominal "price" of it, when measured in non-gold currencies, fluctuates wildly.
Gold is mostly used to make jewelry. And so the demand varies greatly with economic stability. Gold has no magic stability.
Not all ownership is the same. There are common shares and preferred shares. The preferred shares get paid before anyone else. Her shares are common shares and get paid only after every dollar of preferred shares has been paid. Then she only gets 50% of whatever remains. The $900 million they estimated won't cover the preferred shares so she and the other common shareholders won't get anything.
Another observation of value: back in 1964, you could've bought a gallon of gasoline for about 20 cents. Those two dimes would've contained about 0.144 troy ounce of silver. At about $16 per troy ounce, the silver in those two dimes is now worth about $2.30. Strangely enough, that's about what you'd pay in today's debased currency for a gallon of gasoline.
20 January 2017: the End of an Error.
CEOs (and other C-level types) are routinely insured for such legal fees (paid for by the company of course) so... no real risk to her. But you know, because they have no personal risk like that, and get a big payout if they turn out to be incompetent and get fired, is exactly why they deserve 8 figure salaries, right?
Oh... wait...
Actually, C-type are generally indemnified by the company, not independently insured. There is a difference.
Indemnification is that the company itself promises to pay for legal consul and any resulting judgments against for actions you take in the course of your job (save some fraudulent action on your part). The directors and officers insurance that the company purchases to cover this may or may not fully cover this liability in the case that the company fails**. The theory is that plaintiff lawyers generally won't sue for judgments they can't get (only so much blood from a turnip) so as long as the limit is high enough, plaintiffs will settle for the insurance limit.
Of course the employment contract with most C-types generally require the company to maintain a certain amount of "side A" coverage but with a unicorn company, buying enough to satisfy investors losses might be very expensive, so companies often buy some type of umbrella excess "side A" coverage supplement at a higher limit, but plaintiff lawyers can often bleed this umbrella coverage by lengthy corporate investigations and the person that is eventually sued can't do anything about it...
**Such policies are pretty complicated. The "side A" coverage in such a policy would pay the person in case the company can't pay the indemnity (e.g., goes BK), where "side B" would pay to the company if it needed to tap it to pay an indemnity but might be unavailable if the company was insolvent or under administration by a court.
Correct. It also includes your debt.
Plenty of people (and companies), homeless or otherwise, have a less-than-zero net worth.
Forbes is relying on the written law to figure that out. But this is the age of Obama. As we saw with the GM bankruptcy proceedings during the auto bailout, the government can order the bankruptcy judge to ignore the law and pay whomever the government wants paid. This allowed the union to get paid before shareholders despite the law saying the shareholders had priority.
There is no liar like a right-wing AC liar. In the GM bankruptcy proceeding debts were paid in strict accordance with the law. The bondholders (not shareholders) that were upset about not getting preferential treatment were unsecured creditors, unlike the banks that did get paid off first, and had no seniority in settling GM's obligations. They were in the same asset category as the union to whom GM owed a lot of money, and it is up the administrator of the filing to determine how the parties in the same category get treated.
Second class citizen of the New Gilded Age
I would however suggest that you have a common cause with some group, due to your use of a several highly derogatory terms for people who apparently do not agree with you, but hey.
More to the point, I think a major reason people are giving the responses they are to this long slow train wreck of Theranos is how Ms Holmes was held up to be such a glowing example of the truth and light behind women in business by certain groups. It has become quite apparently that this particular train wreck mostly comes down to her belief that hype and contacts has a billion dollar market value, and others supporting her in this. It is quite clear looking back at the hype machine that a good quantity of that has come from 'And look, she is a woman!', so that is a factor, one that she was quite happy to play.
The takeaway here should really be 'step carefully before you raise someone to sainthood for your cause'. This is of course a common mistake, especially these days (by many many different types of groups of course).
The interesting part comes next - Do the people who truly believe in their cause try and shout down any detraction of her as being sexist, or do they quietly admit there is some egg-on-face here and that she was not the saint she was held up to be. Time will tell.
Worst thing is, I don't like her, and part of me can't help but feel vindicated that her own "I'm the Steve Jobs of biotech" persona is backfiring, big time. I was truly disgusted by her attitude during interviews prior to the WSJ article, she reminded me of Marissa Mayer.
I used to work for an investment bank that makes shitloads of money (like billions and billions, year over year) but is never in the news, unlike the competition which hold press conferences and goes on TV shows, often bragging about returns or technology that is significantly less impressive. The reason my former employer keeps a low profile is that once you publicly brag about something, you're on the radar of the media, and you're a target when the rainy days come - and the media tend to use nukes, not sniper rifles. Maybe Mrs Holmes has learned that by now.
As for this latest "news", what is it, really? A made up valuation that has zero basis in reality and no actual financial impact has now been revised by the people who made it up, based on controversy that very few people take the time to thoroughly examine. This is nothing but clickbait built upon clickbait, yet we get the constant flow of Slashdot experts chiming in without having even the most basic understanding of the real issue. I guess this is how the world works, I should get into the clickbait business instead of bitching about it.
lucm, indeed.
First off your reply doesn't follow in this thread. That aside, you should read the article. The company was devalued to 10%, which was only just above the amount obtained from VC money. Since they have preferential stock and get paid out first, she does have a zero net worth as she would get paid nothing after the investors get paid first.
Oh, but it is what is being disputed. Nobody valued Theranos at $9 billion dollars because they were copying Labcorp's business model. Walgreens did not enter into a partnership with Theranos because Theranos would provide a phebotomist on site to draw multiple 5mL samples and ship them to Theranos.
Yes. Researching using commerical samples resulting in the invalidation of two years of sample results in one fell swoop.
Yet again, nobody is interested in a startup that performs tests with "normal" equipment. Theranos touted this very capability in 2014 as something the could already do, not as a multi-year research project.
"And we're able to do all the testing using just a single microsample, rather than having to draw a dedicated tube for each type of test."
So if I got a blood test and my doctor saw the results and wanted other tests done, I wouldn't have to have more blood drawn?
"Exactly. And on their lab form, the physician can write, "If a given result is out of range, run this follow-up test." And it can all be done immediately, using that same sample."
Keep 'em coming. Theranos provided lots of PR material that contradicts you... you just have to specify what they supposedly didn't claim and I can search for more documentation saying otherwise.