Daily Management Review

Forbes: Theranos CEO is not a billionaire


In 2014, founder of Theranos Elizabeth Holmes persuaded investors that her business is worth $ 9 billion. After a series of reputation scandals, this amount dropped to $ 800 million. Today, Forbes lowered assessment of Holmes’ wealth nearly to zero.

Glenn Fawcett
Glenn Fawcett
American Forbes has lowered its assessment of wealth of the youngest female billionaire in the world, Theranos' founder Elizabeth Holmes from $ 4.5 billion to virtually zero. Last year, the publication called her the richest woman entrepreneur in the world, who has achieved business success independently.

Holmes founded Theranos in 2003 at the age of 19 years. To do it, she dropped out of Stanford and put the saved money in development of an innovative method of blood analysis. A few years later, Theranos presented its own unique device for analysis, which, according to the company, used just one drop of blood to receive timely and accurate results. Holmes quickly gained a reputation of "the new Steve Jobs" and acquired the status of the youngest female billionaire in the Forbes list. In 2014, investors valued Theranos at $ 9 billion, and 50 percent-stake of Holmes - at $ 4.5 billion.

Forbes estimated the state of Holmes, basing on her share in Theranos. The company is not traded on the stock exchange, so all its value is based on the investment transactions. Above the business valuation, there is almost nothing known about the company. Earlier, Holmes promised to disclose the results of their medical tests. In April 2016, however, Theranos transferred to the US Food and Drug Administration only one of the promised 120 studies, and withdrew thousands of tests in May. According to Forbes, leakage of financial indicators shows that Theranos’ annual revenue does not exceed $ 100 million, and the analyzes market does not guarantee high profitability for a business.

Forbes interviewed dozens of venture investors, industry experts and analysts, and concluded that real value of Theranos does not exceed $ 800 million. This amount takes into account value of the company’s intellectual property and investment in amount of $ 724 million (according to VC Experts). In addition, the evaluation of $ 800 million includes "more than generous" multiplier to the real company's sales, told a source familiar with Theranos’ financial performance.

In this evaluation, Holmes’ share is worth virtually nothing. Outside investors of Theranos own preferred shares. This means that if Theranos is put on sale or goes bankrupt, they will be first to get their money back. Holmes owns common shares, so she will not get a penny, according to the publication’s source. 

Despite that Forbes zeroed Holmes’ funds out, she is still present in the online ranking of billionaires, with an estimate of $ 3.6 billion.

source: forbes.com