March 27, 2017
By Alex Keown, BioSpace.com Breaking News Staff
PALO ALTO, Calif. – Rupert Murdoch is bailing out of beleaguered Theranos and is taking a big loss in doing so. The Wall Street Journal reported that media mogul Murdoch sold his investments in Theranos valued at $125 million for $1.
The Journal said Murdoch sold his stake back to the company. Murdoch will take a significant loss on the stock, but it will be a benefit when it comes to filing his taxes by writing off the investment. Last week Theranos announced founder Elizabeth Holmes was giving away shares of her personal stake in the company in order 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. Theranos is facing multiple lawsuits. Murdoch was one of the investors who declined the two-for-one offer. It is unknown if he intends legal action against the company.
Share prices of the privately-held Theranos were valued at $15 to $17, but with the two-for-one deal, the share prices were effectively lowered to $5, according to the reports.
At one time, Theranos was reportedly worth about $9 billion, but according to reports the company is in desperate need of cash. During an investors call in February, Theranos said it had no material revenue in 2015 or 2016. It was during that call that investors learned Theranos has about $200 million in its bank accounts, but none of those funds was set aside for legal issues–which is surprising given the company is facing multiple lawsuits seeking hundreds of millions of dollars in damages. The two biggest lawsuits come from former partner Walgreens, which filed a $140 million lawsuit against Theranos and a $100 million lawsuit filed by a Bay Area hedge fund that alleged the biotech company duped investors about the efficacy of its products in order to attract investments. Additionally, the company is facing legal challenges from patients who used the company’s blood-testing technology. Last year, Theranos announced it was forced to void thousands of test results it sent to patients. Many of those patients used the test results to direct their healthcare plans.
Theranos has been in a downfall for nearly the past two years after a series of scathing articles from multiple news outlets have highlighted problems associated with the company’s failed blood-testing technologies. After facing criticism over its technology as well as its clinical practices, which led to the company shuttering its clinical laboratories, Theranos pivoted its business focus to the development of a miniaturized and portable laboratory. Although the company did shift its focus, in January Theranos announced it was terminating about 41 percent of its workforce, the second round of layoffs within a six-month period. The layoffs have left the company with about 220 employees.
