Elizabeth Holmes. Photo: David Paul Morris/Bloomberg via Getty Images

As Elizabeth Holmes retreats further and further into the collar of her requisite black turtleneck, things continue to look worse for her besmirched blood-testing company, Theranos. After months of bad news — including lab closures, major staff layoffs, and a revaluation of her personal wealth at effectively nothing — today, The Wall Street Journal writes that Theranos, yet again, allegedly wasn’t entirely forthcoming regarding its technology. (Holmes & Co. were supposedly creating a blood-testing product that could scan for significant data using less blood than traditional methods. This technology has yet to fully materialize.) The company, WSJ says, “used a shell company to ‘secretly’ buy commercial-lab equipment, and improperly created rosy financial projections for investors.” Theranos used the commercial technology it purchased to stage demonstrations of how its blood tests worked, or theoretically worked.



The information comes from a recently unsealed court filing involving Theranos investors who are currently suing the company. Partner Fund Management L.P., one of the company’s largest backers, is suing Theranos for $100 million. (Theranos has, thus far, denied all of the fund’s allegations.) Perhaps Holmes should call up the folks over at Magic Leap, they know a thing or two about getting busted for fake demonstrations and overselling technology.

Update, April, 21, 2017, at 5 p.m.: A representative for Theranos provided the following statement to Select All.

This is a one-sided filing by one party to litigation, and we will respond at the appropriate time in the appropriate forum. We disagree with much of what PFM alleges in its complaint. This is not, however, the time or place to contest their mischaracterizations of the record. We will litigate this case in court, where it belongs. What we will say now is that the items on which PFM focuses have nothing to do with why PFM invested, and they amount to a repackaging of allegations the media have already reported for nearly two years.



As previously disclosed, Theranos is in the midst of a tender offer involving its most significant shareholders. Elizabeth Holmes’ use of her own shares to recapitalize our C-2 and C-1 investors—and thereby prevent dilution to our other shareholders—is consistent with her longstanding, personal commitment to doing the right thing for the Theranos shareholder base. This tender offer has been in discussion between Theranos and its shareholders since July 2016. To date, more than 99% of C-2 and C-1 investors other than PFM have chosen to participate.



FM, a multi-billion dollar hedge fund, opposes the transaction, and is asking the Court to stop the tender offer because it is “unfair” specifically and only to PFM. In response to PFM’s suit, the Court suspended the tender offer for a month in order to permit sufficient time for the court to review the transaction. PFM’s effort to enjoin the tender offer is meritless; their legal theories are self-serving and would harm the rest of the Theranos shareholders. The Company is vigorously opposing PFM’s new suit and looks forward to completing the transaction with its shareholders.

