Elizabeth Holmes Now Owes Theranos $25 Million

April 6, 2017
By Alex Keown, BioSpace.com Breaking News Staff

PALO ALTO, Calif. – Theranos founder Elizabeth Holmes, who was once worth an estimated $5 billion, owes her company $25 million, according to a new report in The Wall Street Journal.

News of her debt to Theranos was made public after Holmes offered to provide investors with shares from her own personal holdings in exchange for agreeing not to sue the company. The deal document was provided to a select group of investors, according to the Journal’s report, which cited people who had allegedly seen the document. According to the deal, Holmes had an agreement with her company to acquire an additional $25 million worth of stock without having to pay upfront. She had an agreement to pay later, the report said, which was posted in part on Marketwatch. It’s unclear if these shares are the ones that are being provided to the investors who might sign the agreement not to sue the company. It’s also unclear when Holmes and Theranos made the deal for the additional shares. Neither Holmes nor Theranos have commented on the deal.

There is also another question—will Holmes ever repay the debt to her company. The Journal said Theranos has the power to absolve her from the $25 million debt.

While Holmes was once a billionaire, considered the richest self-made woman in the United States worth an estimated $4.5 billion, her net worth has been in doubt for the past year. The majority of her worth was considered to be based on her stake in Theranos, but with the dwindling fortunes of the company, last year Forbes had estimated her net worth to be about $0. Although Holmes has a 50 percent stake in the company, Forbes said her shares are all in common stock, while her investors have “participating preferred shares,” meaning those types of shares take precedence over common stock in case of a liquidation.

Investors have until April 14 to decide whether or not to take the two-for-one stock deal that was reported in March. Under the agreement proposal, Holmes would give away shares of her own personal holdings in the company to avoid lawsuits. The deal went to shareholders who participated in the company’s most recent funding rounds, the last of which was in 2015. According to reports, investors in those funding rounds will receive two additional shares of the company for each share they purchased. But, that deal required the investors to agree not to sue the company.

At least one big investor has already rejected the offer. Media mogul Rupert Murdoch bailed out of the company and took a loss doing so. According to reports, Murdoch sold his investments in Theranos valued at $125 million back to the company for $1.