One way Theranos is hoping to stay afloat is by offering double the shares including some of founder Elizabeth Holmes own shares to investors if they promise not to sue.
Theranos is knee-deep in an avalanche of lawsuits from investors and consumers of its blood-testing products after it was discovered last year the tests had an accuracyproblem and didnt meet with the companys own standards. Its main partner, Walgreens, has since pulled out and is also suing the company.
According to The Wall Street Journal, Theranos board approved a move in February to shuffle shares, including from founder Elizabeth Holmes, to investors as a way to appease them.
The deal would include those investors in Theranos latest funding round in 2015, which yielded $600 million. But those investors,which may include later-stage investors, including BlueCross BlueShield Venture Partners, Continental Properties Co.,Esoom(EnterpriseofTaiwan), Jupiter Partners, Palmieri Trust, Dixon Doll, Ray Bingham and B.J. Cassin, would now get twice the shares for each share they bought in that round, according to the Journal and confirmed by Theranos.
This is an affirmativedevelopment for the company, providing a path forward in partnership withemployees, investors and other stakeholders, Theranos director Daniel J. Warmenhoven said in a statement to TechCrunch. Elizabethelected to contribute her own equity to protect any dilution of shares held by other parties.In my experience, this is a uniquely structured deal that not only demonstrates asophisticated understanding of our operating environmentbut shows a level of selflessness and grace reflecting her commitment to the companys success.
Its not clear how many shares Holmes is offering up herself, but at least a couple of investors arent taking the deal. Theranos has reached a separate agreement with Rupert Murdoch, the executive chairman of News Corp and 21st Century Fox Inc., who refused to agree to the same deal as other investors possibly for tax reasons. Theranos will instead buy back his shares for $1, according to the Journals sources.
Another investor, San Francisco-based hedge fundPartner Fund Management LP, which sued Theranos in Octoberand participated in the $198 Series C round attributed to have driven Theranos to its former $9 billion valuation, also refused the agreement.