Theranos Secures $100M in New Funding from Fortress Capital | Hacker News Reader

Theranos Secures $100M in New Funding from Fortress Capital

fortune.com

58 pointsourmandave42 comments

For everyone saying Fortress are idiots: this is a loan and the amount is conditional. That means 2 things:

1) If Theranos fails, Fortress can claim its assets.

2) The money is not released until certain milestones are met.

So either Theranos misses the milestones, folds, and has Fortress take over its assets, OR Theranos meets the milestones and is actually a valuable business.

Depending on the terms, Fortress could have easily structured this deal such that they win in either scenario. I would imagine that Theranos was desperate ("distressed"), so the terms are likely pretty onerous.

I saw that Fortress is getting warrants worth 4% of Theranos so I agree with your arrestment on both scenarios.

Their building off of Page Mill is probably worth a lot.

I'm certain they don't own 1701 Page Mill Rd and in fact, Stanford owned it previously.

https://www.bizjournals.com/sanfrancisco/news/2017/01/04/kil...

That lot used to house the old WSJ office. Which I find poetic given that the journal was the one that broke the Theranos story.

Kilroy Realty purchased the property in January along with an adjacent property for $130m. Stanford owns the land and does long term ground leases.

Stanford continues to own the land—I think they almost exclusively lease it (even if it is long-term).

Stanford Research Park https://en.wikipedia.org/wiki/Stanford_Research_Park

The Desk Depot guy in Mountain View is probably chortling and rubbing his hands together in anticipation.

Fortress made a fortune in the MBS market. They aren't experts in biotech, but they are very deep in asset backed loans. This isn't "Let's fund a unicorn" situation, it's "Let's get an above market return on a loan where we can claim assets in excess of principal if it goes belly up" situation. The real question is "What are those assets?" but the investment wouldn't be made if they weren't there.

They've got that fly-ass building in Palo Alto, do they own it? Looks to be worth close to $100M right there.

(Seeing a basically pre-revenue company build that thing was in retrospect a good tip-off that it was a scam.)

Naming stadiums and building fancy headquarters can be a tip-off. Look at 3com.

I am astounded that anyone would touch Theranos with a 100-mile pole.

Their claims about their super-special tech were deliberately misleading, taking advantage of the general public's lack of medlab knowledge. They never released details of their "miracle" tech, and even if their claims were true, Holmes' entire "vision" fundamentally misunderstood the lab business and the way data and decisions flow from patient to doctor.

Maybe there's some savvy investing trick going on behind the scenes that I don't understand, but as a former medical lab professional everything about Theranos was giant red flags from the beginning.

Perhaps their assets are north of $100m and this debt is senior to all equity.

Fortress is selling itself (trying at least) to SoftBank [1]. Their stock price is down to 7.87 from 30.17 IPO [2]. Fortress hasn't been doing too well. They've never done well.

[1] https://finance.yahoo.com/quote/FIG/

[2] https://www.institutionalinvestor.com/article/b1505p66vq06cy...

We always assume these fund manager types are smart but history has shown they're often as dumb as the average joe public.

A company with no product, casual relationship with the truth as far as its technical capability goes, tarnished reputation and totally unqualified CEO is worth $0

This is a pitch deck that I would love to see

We’ve had some set backs, but are really excited to show you...

(“Famously inflated the capabilities of its devices”)

Didn’t they just flat out lie?

For certain people it appears the only way to fail is up.

Fortress is weird: https://en.wikipedia.org/wiki/Fortress_Investment_Group

They have often bought distressed assets and also they did some weird things with regards to the Vancouver Olympics.

Great, we need to have more politically enabled companies like Theranos and hope that they continue to thrive.

Hackers compromising their infrastructure from eastern europe/russia/china based IP, and releasing the genetic information they have could provide a great service to the public in the future.

"Theranos, diagnose diseases with AI and Blockchain support"

While the potential negative consequences for cheating fail to outweigh the potential benefits of cheating (depending on who the person is of course) cheating will continue to occur.

I'd like to think there was a time when stunts like Theranos pulled earlier would have been career ending for the people involved but maybe that time never existed. It does suck for everyone else though.

The implicit gain in scummy behavior is definitely a flaw in our system that hopefully gets patched up at some point.

pivot to Theranos Blockchain Biotech and get the party started again

How is this company still operational? Do serious people believe that they will have a functioning and profitable product in the future? Does Theranos still have salaried employees, and if so, what are they working on? The article mentions a "box that diagnoses diseases", which is a meaningless description. They've gone from "running on fumes" to ...what, exactly? I'm extremely puzzled.

They have $200M of cash on hand according to the article. Not defending them but you can do a lot with $200M including a full pivot and brand reboot.

They pay rent on Page Mill Road and have multiple lawsuits pending, last I heard, so I'm wondering how far that cash would actually take them. Also, if Elizabeth Holmes insists on the same level of control without any biomedical credentials, how realistic is a reboot? I would very much like to know the reasoning that any funding providers would use to justify their support.

I guess Fortress thinks they can get a return on the assets, whatever they are. Could be a power play too, if you look at Theranos board there are a surprising amount of political players which could be advantageous for the SoftBank-owned Fortress.

Edit: looks like most of the original board members are gone post-scandal. But for reference here’s who was on it previously http://fortune.com/2015/10/15/theranos-board-leadership/

Investment groups that buy troubled assets are beyond my scope of understanding, but is that what is happening here? It sounds like Theranos is purporting to have a functioning product/business plan in the near future.

I work in medicine so my colleagues and I have been following this farce for several years. When so many advancements and biomedical research can benefit from such funding, why throw money at this fraudulent company?

Edit: Many thanks to users hkmurakami and ukulele above for explanations/clarifications.

They moved everyone to their Newark manufacturing office. (I was wondering why the lights were completely out at 7pm on a Wednesday this week).

I've also seen an ad for subleasing the space relatively recently (Nov or so) so perhaps they have not found sublettors yet.

The suits will probably be settled in the single to double digit millions.

There could very well be some functional aspects of the company's products.

It's not a consumer brand.

So ... if something 'works' and can be proven to work via regulatory approval, or validation from a big chain - there could be something there.

$100M rescue money to get a big piece of something may possibly be worth.

Lots of people have made a lot of money off of distressed assets.

The depth of human stupidity is truly astonishing.

"This company was built on fraud, which was eventually exposed to the world. But what if we...gave them more money?"

Please don't post unsubstantive comments about other people's stupidity. The odds are considerable that you're missing something, and in general HN gets much worse when people do this. Such comments amount to nothing more than puffing ourselves up relative to others. That may attract upvotes from people who'd like to join in, but it adds nothing of value.

We're trying to do better than that here, which is why we have site guidelines like "Please respond to the strongest plausible interpretation of what someone says, not a weaker one that's easier to criticize."

https://news.ycombinator.com/newsguidelines.html

IIRC their board was composed largely of people with deep connections to the government.

I use their board as an example when I teach. It is really useful for helping students understand what a board should do, does, can do, etc. and relating that back to a business.

I’m curious about the key points you call out.

It's basically a three stage thing...

1) I lecture / we talk about what a board does

2) Class brainstorming of what characteristics you would like in board members of a company you founded & what advice you would like from your board

3) We use the really rough evaluative framework from part 2 to analyze a couple of real boards (I've used Theranos, a startup I used to work for that shows up as a lot of examples in class, and some third one that is in the news)

Key point is basically: gravitas, technical competence, business savvy, market insight, and engagement are important but none of them are solely useful. Your board is an asset...and if it isn't you should look at why. Your board helps you make decisions they aren't just for enabling.

I checked LinkedIn and there are ~220 current employees of Theranos listed there, fwiw.

Are you kidding me?

All they need to do is rebrand as Therablockchain or something.

Lol, thanks for the laugh. Merry Christmas.

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