
Theranos’ Letter to Shareholders Shows the Company Is on Its Deathbed - Bud
https://www.buzzfeed.com/ryanmac/theranos-ceo-elizabeth-holmes-desperate-letter-shareholders
======
aj7
Investors 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
The 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
After the first set of lies about hit-milestones/sales, it bacame impossible
to not invent droplet blood tests.

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verandaguy_alt
Asking 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?

~~~
bilkoo
Prompted by this comment I looked up Theranos' investors. Turns out Rupert
Murdoch was in Series A. What irony!

[https://www.crunchbase.com/organization/theranos/investors/i...](https://www.crunchbase.com/organization/theranos/investors/investors_list#section-
investors)

~~~
gravis7777
Why is that ironic?

~~~
danso
Rupert Murdoch owns the WSJ, which ran the major investigation that caused
Theranos to first unravel:

[https://www.theguardian.com/media/2016/nov/29/rupert-
murdoch...](https://www.theguardian.com/media/2016/nov/29/rupert-murdoch-
theranos-investment-wall-street-journal)

Nearly as ironic: the first public big splash article about Theranos was a
puff piece in the WSJ by a Pulitzer Prize winner (the investigative story was
from a 2-time Pulitzer winner, John Carreyrou)

[http://archive.is/8dfJ7](http://archive.is/8dfJ7)

------
saagarjha
> 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

~~~
smallgovt
My guess is the letter was purposefully leaked to increase exposure to
potential financiers.

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sudomake
Can 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
It’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.)

------
dexcs
If 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
The optics of that deal might not look that good for the buyer though.
Essentially you'd be buying a fraud.

~~~
dhimes
I don't get how Holmes is still CEO. I _really_ don't get that.

~~~
untangle
Probably because the Board can't find anyone better to take over this sinking,
toxic ship. Sometimes it's just that simple.

~~~
dragonwriter
> 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.

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NelsonMinar
This 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
Is it any more a ridiculous fantasy than Theranos raising a billion dollars in
the first place?

~~~
fapjacks
Underrated posts of the century.

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olliej
I continue to be amazed that in spite of everything that has happened there is
still a company that is operating...

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dalacv
This 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-
Or Magic: The Gathering. Let me just look at my hand just a few more times.
Surely there's a response to this!

~~~
fapjacks
Found the FNM player.

~~~
vhost-
More like commander at the dive bar.

~~~
fapjacks
Hah! You know I really sat for a minute staring at my response thinking about
changing it to "new commander player" but decided not to.

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kristianc
TLDR: 'We've thrown so much of our investors money into a bottomless pit that
now our only option is to ask for some more.'

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artursapek
I still don't see how this woman is not in federal prison.

~~~
kevinskii
Stay tuned. The investigation is still ongoing. The bar for a criminal
conviction is a lot higher, so it takes a while longer.

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manishsharan
On 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 ?

~~~
uerobert
Anne Wojcicki

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nerdymanchild
We 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?

