Theranos founder Elizabeth Holmes’ net worth plunges from US$4.5B to nothing

Once the darling of the health tech industry, Elizabeth Holmes has reportedly suffered from a major loss, with her net worth plunging from a whopping US$4.5 billion (AU$6.23 billion) to a shocking nothing. Her embattled California-based company Theranos was also hit by a class-action fraud lawsuit.

Holmes, 32, was reported to have a net worth of US$4.5 billion in 2015, even topping the Forbes list of America’s richest self-made women. As the world’s youngest self-made billionaire, she also made her debut on the publication’s Most Powerful Women list in the same year.

But a year later, Holmes seems to have lost it all. Forbes estimated her net worth to be basically $0 today.

As it explained, Holmes’ wealth is based entirely on her 50 percent stake in her blood-testing company, which had an implied US$9 billion (AU$12.46 billion) worth. However, Forbes obtained new information that says Theranos’ annual revenues are actually less than US$100 million (AU$139 million).

“Forbes spoke to a dozen venture capitalists, analysts and industry experts and concluded that a more realistic value for Theranos is US$800 million, rather than US$9 billion. That gives the company credit for its intellectual property and the US$724 million that is has raised, according to VC Experts, a venture capital research firm. It also represents a generous multiple of the company’s sales, which Forbes learned about from a person familiar with Theranos’ finances,” Forbes’ Matthew Herper writes in the June 21 issue of the publication.

Given the figures above, Herper estimates Holmes’ stake in the company as essentially worth nothing since Theranos investors own preferred shares and which meant they get paid back before Holmes, who owns common stock.

Forbes further explained why it has lowered Theranos’ estimated value, saying the company did not present any data proving its systems work, only the US$9 billion valuation is known. The company also failed to make good on its promise to publish data for six months. Its target market may also not exist.

On Wednesday, Theranos has refuted Forbes’ estimate, saying it did not have essential data.

“As a privately held company, we declined to share confidential information with Forbes. As a result, the article was based exclusively on speculation and press reports,” company spokeswoman Brooke Buchanan told Time.

Theranos consumer lawsuit

The privately held health technology firm, which Holmes founded in 2003, has been having problems since last year. The Wall Street Journal reported that the company’s flagship Edison blood-testing device possibly gave inaccurate results. The bulk of blood tests performed by Theranos were also reportedly conducted on traditional blood-testing machines of competitors’ companies rather than on Theranos’ own Edison machines.

Last month, it was hit with a class-action fraud lawsuit, which allege that the firm’s fingerprick testing method was falsely marketed. The method promised to be innovative by requiring patients to provide drops of blood, as opposed to vials, to be processed by its Edison machine.

Law firm McCuneWright filed the suit in the US District Court for Northern California for an anonymous Arizona man only identified as M.P.B. The lawsuit, a copy of which was obtained by USA Today, contends that Theranos’ tens of thousands of patients may have been given incorrect blood test results and have been subjected to unnecessary or potentially harmful treatments, and/or have been denied opportunity to seek proper treatment.

Company spokeswoman Buchanan called the lawsuit “without merit,” adding that Theranos will defend itself against the claims.