Theranos is finally shutting down after investors lost nearly $1 billion

At last, Theranos, a privately held health technology founded in 2003 by then-19-year-old Elizabeth Holmes, is finally shutting down. Yesterday, Theranos announced in an email  to investors that it would cease operations and release its assets and remaining cash to creditors. Most of the company’s employees worked their last days on the previous Friday, August 31, with CEO David Taylor and a few support staff remaining on payroll for a few more days. The Wall Street Journal reported that any equity investments in the company were made worthless by the shutdown.  Theranos is known for its false claims to have devised blood tests that only needed very small amounts of blood.

We’ve covered Theranos numerous times. Back in June, Elizabeth Holmes, Theranos founder and the company’s former president, Ramesh “Sunny” Balwani, were indicted by a federal grand jury in California on charges of wire fraud. Holmes later reached a settlement deal with the SEC, which requires her to pay $500,000, forfeit 19 million shares of company stock, and be barred from having a leadership position in any public company for ten years. Balwani refused to settle with the SEC.

Since founded in 2003, Theranos raised more than US$700 million from venture capitalists and private investors, putting the blood testing startup at $10 billion valuation at its peak in 2013 and 2014. But what goes up must come down. Investors and the media hyped Theranos as a breakthrough in the large blood-testing market, where the US diagnostic-lab industry posts annual sales of over $70 billion. Theranos claimed its technology was revolutionary and that its tests required only about 1/100 to 1/1,000 of the amount of blood that would ordinarily be needed and cost far less than existing tests.

The turning point then came in October 2015, when investigative reporter John Carreyrou of The Wall Street Journal questioned the validity of Theranos’ technology. Since then, the company has faced a string of legal and commercial challenges from medical authorities, investors, the U.S. Securities and Exchange Commission (SEC), Centers for Medicare and Medicaid Services (CMS), state attorneys general, former business partners, patients, and others.[11] By June 2016, it was estimated that Holmes’ personal net worth had dropped from $4.5 billion to virtually nothing. The company was near bankruptcy until it received a $100 million investment from Fortress Investment Group in 2017.[12] By 2018, the company was again close to going bankrupt.

Not so long ago, Elizabeth Holmes was featured in numerous magazine as an example of a success story. Inc Magazine described Holmes “as the world’s youngest female self-made billionaire, she’s stumbled into this rarefied position and is beginning to own it.” Just in October of 2015, Holmes was estimated to have net worth is $4.5 billion.