Just 2 years ago, Elizabeth Holmes was ranked among the wealthiest women in the world on the Forbes billionaire list. Now, the publication has reconsidered—and decided she’s worth nothing.
How did this happen?
It was like a dream come true. A girl who was afraid of needles and wanted to change the world found a way to perform blood tests with only a few drops of blood from a finger prick.
Hundreds of millions worth of investment poured into her company—Theranos—and her 50 percent stake was suddenly valued at $4.5 billion.
Elizabeth Holmes was 30 at the time. It was 2014.
The problems started in October a year later. After The Wall Street Journal ran an investigative piece calling the company’s groundbreaking method into question, the Food and Drug Administration stated Theranos’s technology was only approved for a single test—for herpes. The company had to perform all other tests the old-fashioned way, by drawing blood from a vein.
Holmes promised data showing her tests were reliable and accurate, yet 7 months later, she was yet to deliver.
Meanwhile, the Centers for Medicare and Medicaid Services found “deficient practices” at one of Theranos’s laboratories—in Newark, N.J.
Now, Forbes, who previously listed Holmes as the 121st richest American, has decided to revise her net worth.
“Our estimate of Holmes’ wealth is based entirely on her 50% stake in Theranos,” Forbes stated in a June 1 article.
Apart from all the issues mentioned above, Forbes learned Theranos’ annual revenue is less than $100 million.
And so, speaking to “a dozen venture capitalists, analysts and industry experts,” Forbes concluded Theranos is now worth $800 million.
If the company was to get liquidated, its investors would be first to get paid, since they hold preferred shares. Holmes’ stake is in common stock so she would be the last in line.
“Holmes’ stake is essentially worth nothing,” Forbes stated, reducing her net worth to $0 and striking her off its list of wealthy individuals.
James Stewart of The New York Times argued that Holmes fit into a successful tech startup stereotype and was therefore able to woo investors without providing much evidence. After all, she is a college dropout wearing black turtlenecks and disrupting an established industry model.
Fortune’s Dan Primack argued Theranos is different from other startups, because its problem is not that it’s overvalued, but that its underlying technology is called in question.