Riddle me this: You think you might want to sue a company. But instead, would you like a lot of shares in it?
If you like the sound of that deal, you'll love what the Wall Street Journal reports was being offered by the embattled blood-testing company Theranos, who reportedly told some of its shareholders they could have more shares if they promised not to sue.
Theranos, for those who haven't been playing along, is a Silicon Valley unicorn that's been very publicly bleeding out since the Journal's investigative reporting questioned the veracity of the startup's vaunted claims that it could execute many difficult blood tests with a single pinprick.
Once valued at $9 million, Theranos is now being sued every which way, including by onetime partner Walgreens over $140 million in voided tests. In November, an early whistleblower at the company came forward publicly: 26-year-old Tyler Shultz, whose grandfather, George Shultz, is a Theranos board member and is best known for serving under Ronald Reagan as Secretary of State.
Now, according to the Journal's "sources familiar with the matter," investors in Theranos' latest funding rounds could get two additional shares for each one they already had, paying $15 to $17 a share but getting what would effectively be $5 a share. Those shares would be from founder Elizabeth Holmes and her personal stake in the Palo Alto-based company, in which she apparently seeks to shed her majority. Company director Daniel Warmenhoven claimed that Holmes's plan demonstrated a "level of selflessness and grace reflecting her commitment to the company’s success.” According to CNBC, Theranos' gathered more than $600 million in funding in its latest round but only holds about $150 million now, not including debt.
Some investors, such as conservative media mogul Rupert Murdoch, won't be taking the bait. He's selling his $125 million stake in the company for just $1. But don't worry too much about him: This way, he'll be able to write off the investment as a loss, avoiding millions in taxes.