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Old 2nd June 2016, 12:49 PM   #1
shemp
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Usually, when people say you're worth nothing, they don't mean it literally, but...

...in this case, Forbes does.

Quote:
​Forbes: Elizabeth Holmes, once worth $4.5B, now worth nothing

NEW YORK - Forbes has revised the net worth of the woman it crowned America's richest self-made woman last year from $4.5 billion to nothing.

Forbes says its estimate of Elizabeth Holmes' wealth is based entirely on her 50 percent stake in troubled blood-testing startup Theranos. The company acknowledged in April that it's under investigation by several regulators and agencies following a series of reports by The Wall Street Journal in which former employees said the company's tests were unreliable. The tests use only a few drops of blood.

Theranos said the articles were inaccurate when they were published.

Forbes says its previous estimate of her wealth came from a $9 billion valuation for the company in 2014.
Regardless of what's going on with Theranos, I think it says more about the ability of Forbes and other "experts" to pull numbers out of their butts than anything else. It's a privately held company and Forbes did not have access to the company's books.

I don't really give two figs, but the headline conjured up images of some big bully standing over a tiny woman, pointing at her and screaming "YOU'RE WORTHLESS!!!"

Edited to add: When I went to Bing and searched for "you are worthless" images, several pictures of her were in the top 25 or so. I guess that settles it! Thought I might a few of my own, but no such luck.
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Last edited by shemp; 2nd June 2016 at 01:00 PM.
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Old 2nd June 2016, 06:17 PM   #2
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Interesting. Is she really worth "nothing" I wonder? Has she no possessions? no home? not even a few grand in the bank? I suspect she might actually be "worth" more than I am- perhaps also more than you.
In which case, it is enlightening to consider what Forbes believes the majority of human beings are actually worth.
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Old 2nd June 2016, 11:53 PM   #3
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Many, many people have negative net worth - the value of their debt exceeds the value of their assets. There are probably a lot of people out there who have been put into that situation by the drop in property values or, in the U.S. by medical bills.

In the case of a startup company, particularly one which isn't hasn't yet had an IPO, then the valuation of the company is going to be volatile, particularly in a case like this where intellectual property is probably the single largest - if not the only - asset.

In the case of Elizabeth Holmes, maybe she doesn't have a lot of money. She could have been drawing a nominal salary on the basis that her stock would eventually be worth a fortune. As a startup, the shares she had would not be paying a dividend and at age 32 she could have considerable debts from her college education and/or the costs of setting up the business. I know plenty of 32 year olds with little or no net worth.

IMO it's perfectly feasible that without the value of her stock she would have negative net worth and now that the intellectual property underpinning the company is in doubt, that stock is worthless. The entrepreneur's lot is not a happy one.
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Old 4th June 2016, 09:49 AM   #4
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Donald Trump, some years ago, was supposed to have had a negative net worth. Banks were falling all over themselves to loan him money anyhow. Some wound up regretting it.
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Old 4th June 2016, 03:46 PM   #5
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Originally Posted by Trebuchet View Post
Donald Trump, some years ago, was supposed to have had a negative net worth. Banks were falling all over themselves to loan him money anyhow. Some wound up regretting it.
Didn't he once have a negative net worth of minus nine billion dollars or something absurd like that?
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Old 6th June 2016, 12:12 PM   #6
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Originally Posted by shemp View Post
...in this case, Forbes does.



Regardless of what's going on with Theranos, I think it says more about the ability of Forbes and other "experts" to pull numbers out of their butts than anything else. It's a privately held company and Forbes did not have access to the company's books.

I don't really give two figs, but the headline conjured up images of some big bully standing over a tiny woman, pointing at her and screaming "YOU'RE WORTHLESS!!!"

Edited to add: When I went to Bing and searched for "you are worthless" images, several pictures of her were in the top 25 or so. I guess that settles it! Thought I might a few of my own, but no such luck.
In Forbes' defense, they are more explicit about what they're calculating: "Net Worth of Equities minus Debts" Her primary asset was common shares in Theranos, which are valued at $0.

Considering she has some liabilities (unpaid taxes) and her income is imminently cratering, she would be be at a negative net worth, if not for the high probability of bankruptcy zeroing it out.
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Old 6th June 2016, 12:15 PM   #7
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Originally Posted by The Don View Post
Many, many people have negative net worth - the value of their debt exceeds the value of their assets. There are probably a lot of people out there who have been put into that situation by the drop in property values or, in the U.S. by medical bills.

In the case of a startup company, particularly one which isn't hasn't yet had an IPO, then the valuation of the company is going to be volatile, particularly in a case like this where intellectual property is probably the single largest - if not the only - asset.

In the case of Elizabeth Holmes, maybe she doesn't have a lot of money. She could have been drawing a nominal salary on the basis that her stock would eventually be worth a fortune. As a startup, the shares she had would not be paying a dividend and at age 32 she could have considerable debts from her college education and/or the costs of setting up the business. I know plenty of 32 year olds with little or no net worth.

IMO it's perfectly feasible that without the value of her stock she would have negative net worth and now that the intellectual property underpinning the company is in doubt, that stock is worthless. The entrepreneur's lot is not a happy one.
Her personal financial problem now is that since she built the company on fraud, there will be criminal fines and compensation and potentially damages from patients who received fabricated diagnoses, that far exceed what little savings she could possibly have reserved from her salary. Looking to the future, this level of fraud may make her unhireable, and she even dropped out of college and has no degree to fall back on.
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Old 6th June 2016, 01:28 PM   #8
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Originally Posted by TubbaBlubba View Post
Didn't he once have a negative net worth of minus nine billion dollars or something absurd like that?
He had terrific debt. He had great debt. The best debt.
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Old 12th September 2016, 04:33 AM   #9
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Came across an interesting history of the downfall of Theranos and its CEO Elizabeth Holmes in Vanity Fair.

It's a good case study for skeptical thinking. A lot of smart people bought into the whole company narrative. One skeptical reporter did not.

Here's how it begins:

Quote:
It was late morning on Friday, October 16, when Elizabeth Holmes realized that she had no other choice. She finally had to address her employees at Theranos, the blood-testing start-up that she had founded as a 19-year-old Stanford dropout, which was now valued at some $9 billion. Two days earlier, a damning report published in The Wall Street Journal had alleged that the company was, in effect, a sham—that its vaunted core technology was actually faulty and that Theranos administered almost all of its blood tests using competitors’ equipment.

The article created tremors throughout Silicon Valley, where Holmes, the world’s youngest self-made female billionaire, had become a near universally praised figure. Curiosity about the veracity of the Journal story was also bubbling throughout the company’s mustard-and-green Palo Alto headquarters, which was nearing the end of a $6.7 million renovation. Everyone at Theranos, from its scientists to its marketers, wondered what to make of it all.
There is an almost cargo-cultish aspect here. She had an extreme Steve Jobs fetish to the point where she copied just about everything about him right down to the black turtleneck and his weird diet choices too. Very secretive. Even employees of the company were kept in the dark about what people in the other divisions were doing. It's a good read though.
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Old 12th September 2016, 09:08 PM   #10
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Originally Posted by Puppycow View Post
Came across an interesting history of the downfall of Theranos and its CEO Elizabeth Holmes in Vanity Fair.

It's a good case study for skeptical thinking. A lot of smart people bought into the whole company narrative. One skeptical reporter did not.

Here's how it begins:



There is an almost cargo-cultish aspect here. She had an extreme Steve Jobs fetish to the point where she copied just about everything about him right down to the black turtleneck and his weird diet choices too. Very secretive. Even employees of the company were kept in the dark about what people in the other divisions were doing. It's a good read though.
It's the secrecy, and the way it was carried out, that should really have been the key red flag. There's a big difference between keeping proprietary knowledge secret versus using scare tactics to block any attempt to question anything.

When you have revolutionary medical technology, you want it out there as quickly as possible. Branding in the medical world is huge and being the first is a big deal. You want peer reviews, you want doctors and researchers trumpeting your technology, in order to ensure that your brand and your image becomes associated with the technology before some competitor invents something similar and steals your thunder.
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Old 13th September 2016, 07:20 AM   #11
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Originally Posted by Puppycow View Post
It's a good case study for skeptical thinking. A lot of smart people bought into the whole company narrative.
There are two smart people who didn't. They addressed it at the Berkshire meeting in May. Said they had been approached about investing and looked at the numbers. Charlie Munger referred to Theranos as a "sewer".
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Old 14th September 2016, 12:03 AM   #12
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Originally Posted by The Central Scrutinizer View Post
There are two smart people who didn't. They addressed it at the Berkshire meeting in May. Said they had been approached about investing and looked at the numbers. Charlie Munger referred to Theranos as a "sewer".
It's not the sort of company they would usually invest in, is it?

They are more like value investors who invest in known quantities than venture capitalist types who invest in long shot startups, aren't they?
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Old 14th September 2016, 11:11 AM   #13
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Originally Posted by Puppycow View Post
It's not the sort of company they would usually invest in, is it?

They are more like value investors who invest in known quantities than venture capitalist types who invest in long shot startups, aren't they?
Correct on both counts.
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Old 14th September 2016, 11:34 AM   #14
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Originally Posted by angrysoba View Post
He had terrific debt. He had great debt. The best debt.
His debt was yuge but Mexico paid it for him.
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Old 14th September 2016, 07:47 PM   #15
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Even the venture capitalist that invested aren't necessarily stupid or even huge risk takers. They're playing the numbers game, knowing that for every 100 companies they invest in, five or six will pay off and the rest will tank. While this case is more high profile than most business failures, for most of the venture capitalists, this type of stuff is simply the cost of doing business.
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Old 15th September 2016, 03:10 AM   #16
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Originally Posted by simonxlong View Post
Even the venture capitalist that invested aren't necessarily stupid or even huge risk takers. They're playing the numbers game, knowing that for every 100 companies they invest in, five or six will pay off and the rest will tank. While this case is more high profile than most business failures, for most of the venture capitalists, this type of stuff is simply the cost of doing business.
In other words, they want to get in at the ground floor, and bank on at least some buildings having something further up. When Theranos was valued in the billions, the ground floor was long gone, but they still found investors. Those investors were somewhat less than savvy.
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Old 15th September 2016, 04:20 PM   #17
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Originally Posted by timhau View Post
In other words, they want to get in at the ground floor, and bank on at least some buildings having something further up. When Theranos was valued in the billions, the ground floor was long gone, but they still found investors. Those investors were somewhat less than savvy.
True, but that is the nature of the beast. Those investors probably bought in based on the company's story and its founder, who had appeared on the covers of Forbes, Fortune, and Inc. Considering that she fooled those magazines, which should at least have some pretensions to understanding business valuation, it is not surprising that investors would rely on their judgment.

To me, this quote from Holmes, about how her product worked, should have raised a big red flag:

Quote:
... a chemistry is performed so that a chemical reaction occurs and generates a signal from the chemical interaction with the sample, which is translated into a result, which is then reviewed by certified laboratory personnel.
And this should get a horselaugh:

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Old 16th September 2016, 05:00 AM   #18
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Originally Posted by Brainster View Post
True, but that is the nature of the beast. Those investors probably bought in based on the company's story and its founder, who had appeared on the covers of Forbes, Fortune, and Inc. Considering that she fooled those magazines, which should at least have some pretensions to understanding business valuation, it is not surprising that investors would rely on their judgment.
Actually, it should be a huge surprise. Magazines, including Forbes, Fortune etc. want to sell copies. High-quality analysis investigative journalism sells in professional circles (or at least I hope it does), but so does hype, which is easier, quicker, and much cheaper. I don't think any venture capitalist invests based on Forbes covers, but they're just as likely to be taken in by hype as anyone else.

And yeah, those quotes should have been huge red flags, as big as you've ever seen. But that's the nature of hype -- it makes people overlook even obvious warning signs.
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Old 17th September 2016, 09:39 AM   #19
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Originally Posted by timhau View Post
In other words, they want to get in at the ground floor, and bank on at least some buildings having something further up. When Theranos was valued in the billions, the ground floor was long gone, but they still found investors. Those investors were somewhat less than savvy.
They were still getting in at the ground floor level. The company's product was not mainstream yet, and, had it actually worked, $4 or even $10 billion would have been chump change compared to what the company would have been worth. They would have been able to corner the diagnostics market for years, and an IPO valuation of $100+ billion would not have been improbable.
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Old 11th October 2016, 08:29 AM   #20
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Originally Posted by simonxlong View Post
Even the venture capitalist that invested aren't necessarily stupid or even huge risk takers. They're playing the numbers game, knowing that for every 100 companies they invest in, five or six will pay off and the rest will tank...
and how many will be sued ?

http://www.wsj.com/articles/major-in...nos-1476139613

(I haven't read the article, not subscribing wsj)
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Old 15th October 2016, 09:57 AM   #21
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Originally Posted by wea View Post
and how many will be sued ?

http://www.wsj.com/articles/major-in...nos-1476139613

(I haven't read the article, not subscribing wsj)
here's accessible version:
Theranos, still limping, smacked with fraud lawsuit by big, mad investor
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Old 8th November 2016, 07:34 PM   #22
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Well if Elizabeth Holmes was worth a lot of money and Forbes says otherwise, this is an awfully bad reputation. Also since the clarity on the books and tests were shady then that is another problem. If she had a lot of money I am sure that this change. If she had sponsors (or similar) she could have lost a lot of money and actives. Therefore, would have to make adjustments in her lifestyle. But what is interesting for me is that how can
Forbes say that so harshly when I'm sure she is worth a lot still. (like somebody said before)
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Old 9th November 2016, 02:34 AM   #23
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Originally Posted by stephaniediazllorens View Post
...Forbes say that so harshly when I'm sure she is worth a lot still. (like somebody said before)
Wellcome to the forum.

If investors retreat and she has to face lawsuits, she could actually be into the red
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Old 5th December 2016, 02:29 AM   #24
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Some people uttered words but they don't mean anything but the thing is we couldn't take it back anymore especially if the one who said it was already misunderstood. So the lesson here is to be very careful about our actions and words towards people.
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Old 5th December 2016, 02:52 AM   #25
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Originally Posted by Hopeful Parallel View Post
Some people uttered words but they don't mean anything but the thing is we couldn't take it back anymore especially if the one who said it was already misunderstood. So the lesson here is to be very careful about our actions and words towards people.
? are you referring to Theranos' behaviour with respect to Ian Gibbons?
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Old 12th July 2017, 11:44 AM   #26
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little update
it seems theranos...is burning through $10 million a month on legal fees

https://www.forbes.com/sites/peterco.../#3d9852375304
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Old 5th October 2019, 07:05 PM   #27
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Just when you thought it could not get worse. It did.

https://www.washingtonpost.com/busin...own-attorneys/

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Old 6th October 2019, 07:02 AM   #28
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Originally Posted by Puppycow View Post
It's not the sort of company they would usually invest in, is it?



They are more like value investors who invest in known quantities than venture capitalist types who invest in long shot startups, aren't they?
I'm reading Bad Blood right now. Theranos would have been through several rounds of VC funding by that point. Courting Berkshire was probably part of a strategy to demonstrate transition from startup venture to going concern. But they weren't ready (and actually never would be). Berkshire saw this, and opted out.
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Old 6th October 2019, 07:20 AM   #29
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I thought the documentary was pretty good.

https://en.wikipedia.org/wiki/The_In...Silicon_Valley
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Old 9th October 2019, 01:45 PM   #30
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Originally Posted by Distracted1 View Post
Interesting. Is she really worth "nothing" I wonder? Has she no possessions? no home? not even a few grand in the bank? I suspect she might actually be "worth" more than I am- perhaps also more than you.
In which case, it is enlightening to consider what Forbes believes the majority of human beings are actually worth.

Relevant: She hasn't paid her lawyers in a year.
https://www.businessinsider.com/ther...-claim-2019-10

She might very well have stashed some money somewhere. But if she did it right nobody will find it. Meanwhile, she's looking at 20 years in the Graybar Motel.
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Old 9th October 2019, 01:51 PM   #31
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Originally Posted by Puppycow View Post
It's not the sort of company they would usually invest in, is it?

They are more like value investors who invest in known quantities than venture capitalist types who invest in long shot startups, aren't they?
Buffett has said he only invests in businesses that he understands. He largely avoided the tech collapse because he didn't understand why the valuations were so high. On the other hand, he bought the Dairy Queen chain because he liked their food.

And he famously took Bill Gates to lunch at McDonald's and paid with coupons.
https://www.cnbc.com/2017/02/17/warr...h-coupons.html
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Old 10th October 2019, 10:18 AM   #32
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Originally Posted by Trebuchet View Post
Donald Trump, some years ago, was supposed to have had a negative net worth. Banks were falling all over themselves to loan him money anyhow. Some wound up regretting it.
If you owe the bank five thousand dollars and you can't pay it back you have a problem. If you owe the bank five billion dollars and you can't pay it back they have a problem.
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