First, Trevor Milton's fraudulent claims about functional electric trucks and billions of dollars in preorders. Now, Elizabeth Holmes' Theranos' multibillion-dollar private-market valuation dwindled to nothing. Needless to say, the U.S. securities regulators have their hands full.
At least the damage at Theranos was confined to professional investors. Imagine the outrage if Theranos went public via SPAC merger, with a stock price propped up by retail investors who believed Elizabeth Holmes’ blood-testing venture was legit -that's a scary thought. Holmes' blood-testing outfit touted novel technology and massive future sales collapsed after word hit the street that the former Silicon Valley darling was in fact lying to investors about sales and proof of concept.
Theranos, was valued at $10B in early 2015 on the promise of blood-testing device that Elizabeth Holmes said could perform upwards of 240 clinical tests using a single droplet of blood from a finger prick. Such technology would be a game-changer in patient diagnosis, if it were in fact possible. Holmes also touted that Theranos was expected to generate in the neighborhood of $1B in 2015 revenue, when in reality prosecutors allege she knew the true accurate figure was a few hundred thousand.
In the startup world, you assume any optimistic projections are made in good faith. Venture capitalists invest in startup companies' ability to deliver on these expectations. Theranos is a cautionary tale of fabricated performance and defrauding investors.
The scariest part of this fiasco is the hypothetical scenario of a prominent SPAC falling victim to a fraud of this magnitude. We've seen it before with Trevor Milton lying about Nikola. This begs the question, if a SPAC could get comfortable buying Nikola, what preventive measures will the US Securities Regulators put in place to ensure a company like Theranos (which on paper would be a no-brainer to any SPAC) from going public and potentially crippling retail investors?
Elizabeth Holmes trial starts today (Wednesday September 8th). Theranos' multibillion-dollar private-market valuation has dwindled to nothing.