This woman is really amazing!

[rkbabang]

I'll be the first one to admit that I'm no sage short-seller or anything of the sort. And I obviously didn't know anything about outright fraud when this turned up first.

 

However, her whole persona was the most ridiculously blatant thing ever and could only work in an era when the feminist narrative in some quarters is strong to the point of cultishness. She was a female carbon copy of Steve Jobs with a list of platitudes. How that was ever able to get as big as it did is a fantastic testament to herd behavior.

 

Had she looked, dressed, and spoke exactly the same, yet her product worked exactly as she said it did with no lies and/or fraud would you still have said this?  I don’t see how any of that matters.

[writser]

Ex post everything would be fine of course. Ex ante: what are the chances of something fishy going on if your CEO is basically a cardboard copy of Steve Jobs that drinks "a pulverized concoction of cucumber, parsley, kale, spinach, romaine lettuce, and celery" several times a day to "save time"?

 

[arcube]

Massive shout out to John Carreyrou of WSJ for such high quality investigative journalism. This story was so interesting on so many levels.

[alwaysinvert]

I'll be the first one to admit that I'm no sage short-seller or anything of the sort. And I obviously didn't know anything about outright fraud when this turned up first.

 

However, her whole persona was the most ridiculously blatant thing ever and could only work in an era when the feminist narrative in some quarters is strong to the point of cultishness. She was a female carbon copy of Steve Jobs with a list of platitudes. How that was ever able to get as big as it did is a fantastic testament to herd behavior.

 

Had she looked, dressed, and spoke exactly the same, yet her product worked exactly as she said it did with no lies and/or fraud would you still have said this?  I don’t see how any of that matters.

 

I did find her ridiculous from the very beginning, but that's not actually the point; I may very well be equally as biased in the opposite direction. The point is why did people not stay *agnostic*? Because they badly wanted to believe.

[LC]

I'm not sure people blindly believed...didn't they fabricate test results which showed the product worked?

[Liberty]

So let me get this straight?

 

Elizabeth Holmes is going to pay a $500k fine AND won't be able to be in C-suite of a public company for 10 years, and will give up 19mmm shares?  She also won't be able to profit from Theranos until $750mm is paid back to investors?

 

What about all the money already paid to Ms. Holmes from Theranos?  What about all the benefits & perks she already got?

 

It would interesting to see what Ms. Holmes CURRENT life style is like...does she live in a house?  Does she drive a nice vehicle?  Does she frequently go out to eat & drink & party with friends?

 

I am skeptical about a lot of these "financial settlements".  I would wager that while a lot of the people making these agreements lose some $$$$, their lifestyles are probably similar to what they were living BEFORE the settlement.  These things look like little more than slaps on the wrist.

 

I could be wrong, but I would be willing to wager that Ms. Holmes is not living in a 1 bedroom apartment, taking public transportation (or riding a bike) and eating ramen noodles, bananas and peanut butter.

 

It's not over:

 

[Spekulatius]

So let me get this straight?

 

Elizabeth Holmes is going to pay a $500k fine AND won't be able to be in C-suite of a public company for 10 years, and will give up 19mmm shares?  She also won't be able to profit from Theranos until $750mm is paid back to investors?

 

What about all the money already paid to Ms. Holmes from Theranos?  What about all the benefits & perks she already got?

 

It would interesting to see what Ms. Holmes CURRENT life style is like...does she live in a house?  Does she drive a nice vehicle?  Does she frequently go out to eat & drink & party with friends?

 

I am skeptical about a lot of these "financial settlements".  I would wager that while a lot of the people making these agreements lose some $$$$, their lifestyles are probably similar to what they were living BEFORE the settlement.  These things look like little more than slaps on the wrist.

 

I could be wrong, but I would be willing to wager that Ms. Holmes is not living in a 1 bedroom apartment, taking public transportation (or riding a bike) and eating ramen noodles, bananas and peanut butter.

 

Based on the lastest pictures, she seemed to go to a really bad hairdresser, so that’s a start.

[ScottHall]

You guys are missing the point as usual. Sometimes founders have to create grand stories to raise the money to finance the work to get to the point that they aren't stories anymore. So many great companies have been built this way that it's very typical of a value investor to jump all over the leaders who fail to make the transition. Reflexivity is real and Holmes did not prove as skilled at mastering this art as Musk, Trump or Bezos.

 

Classic case of value investors missing the point, again.

[Liberty]

[Eye4Valu]

You guys are missing the point as usual. Sometimes founders have to create grand stories to raise the money to finance the work to get to the point that they aren't stories anymore. So many great companies have been built this way that it's very typical of a value investor to jump all over the leaders who fail to make the transition. Reflexivity is real and Holmes did not prove as skilled at mastering this art as Musk, Trump or Bezos.

 

Classic case of value investors missing the point, again.

 

So Musk, Trump and Bezos were all frauds who eventually turned the corner?

[Cigarbutt]

"You guys are missing the point as usual. Sometimes founders have to create grand stories to raise the money to finance the work to get to the point that they aren't stories anymore. So many great companies have been built this way that it's very typical of a value investor to jump all over the leaders who fail to make the transition. Reflexivity is real and Holmes did not prove as skilled at mastering this art as Musk, Trump or Bezos.

 

Classic case of value investors missing the point, again."

 

Disclosure:

-Have more difficulty with "narratives"

-Try to keep an open mind

 

Does this have to be a duel between numbers and stories?

Is there any way to bridge the gap?

 

Mr. Damodaran gives it a try:

http://people.stern.nyu.edu/adamodar/pdfiles/country/narrative&numbers.pdf

 

I will only say that investment on a great story that rely on character evaluation is a very difficult exercise (at least for me).

[Kuhndan]

#22 Holmes is notoriously secretive, and while she's been criticized by industry peers as such, insists she must protect her technology from the prying eyes of competitors.

 

I guess there was a reason she was so secretive.

[ScottHall]

You guys are missing the point as usual. Sometimes founders have to create grand stories to raise the money to finance the work to get to the point that they aren't stories anymore. So many great companies have been built this way that it's very typical of a value investor to jump all over the leaders who fail to make the transition. Reflexivity is real and Holmes did not prove as skilled at mastering this art as Musk, Trump or Bezos.

 

Classic case of value investors missing the point, again.

 

So Musk, Trump and Bezos were all frauds who eventually turned the corner?

 

Musk and Trump are not out of the woods yet but Bezos has reached escape velocity and has for a long time.

 

Musk needs to continue to tap capital markets to finance his operating losses until he can get where he needs to be. Tesla consistently and wildly overestimates its unit production and has been getting investor financing while doing so. People need to believe in Musk for him to overcome the obstacles ahead of him, because he will require their money to do so. So long as people believe in Musk enough to continue to finance him, Tesla can afford to lose as much money as it wants. When belief in Musk is no longer high enough for people to finance him, that is when current year economics would matter.

 

Tesla's biggest asset is Musk's ability to raise capital. If he can raise enough of it, he may be able to "cross the rubicon" into the world he wants to see. That's a world where his companies could be worth a lot. But it's reflexive... if people don't believe in him, he won't get there.

 

So is it fraud to use your marketing skills to highlight the amazing stuff you've been able to accomplish, so that people will want to continue to finance you despite ongoing operating losses? A lot of people are jumping ship at Tesla. That's usually not a great sign. Maybe Google will buy Tesla if public perception falters and finance Musk. It'd be more sensible than any other project.

 

Or maybe the public will continue to finance him so long as he continues performing technological marvels, operating performance issues be damned, and one day the infrastructure will really come together. Who knows?

 

Trump is Trump and we'll leave it at that, so this doesn't become a political thread.

[rkbabang]

You guys are missing the point as usual. Sometimes founders have to create grand stories to raise the money to finance the work to get to the point that they aren't stories anymore. So many great companies have been built this way that it's very typical of a value investor to jump all over the leaders who fail to make the transition. Reflexivity is real and Holmes did not prove as skilled at mastering this art as Musk, Trump or Bezos.

 

Classic case of value investors missing the point, again.

 

So Musk, Trump and Bezos were all frauds who eventually turned the corner?

 

No, but these criticisms of her were abundant here even before it was known that she was a fraud.

[Libs]

FWIW-

 

I have a friend who has worked in the medical device industry for years, an executive at a firm known to everyone here. He says  their DD made it clear the products could not perform to the hype, and they moved on quickly.

 

He's astonished at the 'fools' who invested in Theranos.

 

[Pelagic]

FWIW-

 

I have a friend who has worked in the medical device industry for years, an executive at a firm known to everyone here. He says  their DD made it clear the products could not perform to the hype, and they moved on quickly.

 

He's astonished at the 'fools' who invested in Theranos.

 

This brings up a question. Does narrative matter more in highly technical startups in terms of attracting funding. What percent of investors are capable of doing the DD necessary to determine if what the narrative claims is the goal is actually possible. Someone in the industry like your friend, yes, the average VC - probably not and then they have to hire someone to do their DD and weigh that against the narrative and prior investment rounds where other investors presumably did their DD.

 

In a less technical startup investors want to mainly see traction - not that that will necessarily translate to profitability.

[tooskinneejs]

I suspect there is another Holmes out there - a guy who once couldn't get a job as a teacher and now leads a purportedly very large overseas company.  His rags to riches story kind of reminds me of the gym teacher who went on to lead WorldCom.

[CONeal]

FWIW-

 

I have a friend who has worked in the medical device industry for years, an executive at a firm known to everyone here. He says  their DD made it clear the products could not perform to the hype, and they moved on quickly.

 

He's astonished at the 'fools' who invested in Theranos.

 

It boils down to the FOMO principal  "Fear Of Missing Out"

[LC]

FWIW-

 

I have a friend who has worked in the medical device industry for years, an executive at a firm known to everyone here. He says  their DD made it clear the products could not perform to the hype, and they moved on quickly.

 

He's astonished at the 'fools' who invested in Theranos.

 

This brings up a question. Does narrative matter more in highly technical startups in terms of attracting funding. What percent of investors are capable of doing the DD necessary to determine if what the narrative claims is the goal is actually possible

 

Great point. If you can't form an informed opinion, then move on. The only people who should have thought about investing are those with the resources to perform the scientific analysis necessary to come to such an opinion.

[Liberty]

Book coming, by the journalist who did a lot of the heavy work of uncovering this:

 

[siddharth18]

 

 

You guys are missing the point as usual. Sometimes founders have to create grand stories to raise the money to finance the work to get to the point that they aren't stories anymore. So many great companies have been built this way that it's very typical of a value investor to jump all over the leaders who fail to make the transition. Reflexivity is real and Holmes did not prove as skilled at mastering this art as Musk, Trump or Bezos.

 

 

Classic case of value investors missing the point, again.

 

So is it fraud to use your marketing skills to highlight the amazing stuff you've been able to accomplish, so that people will want to continue to finance you despite ongoing operating losses? A lot of people are jumping ship at Tesla. That's usually not a great sign. Maybe Google will buy Tesla if public perception falters and finance Musk. It'd be more sensible than any other project.

 

Or maybe the public will continue to finance him so long as he continues performing technological marvels, operating performance issues be damned, and one day the infrastructure will really come together. Who knows?

 

 

There's a big difference between selling a future dream/vision and lying about past and present facts. I think that's where Theranos crossed the line. If you read SEC's complaint, they highlight multiple instances of egregiously false statements originating from the top, just to keep the story alive. Theranos went beyond simply "highlighting the amazing stuff." It began fabricating facts that it knew didn't exist. For instance, Holmes told that Theranos’ technology had been deployed by the DOD in Afghanistan when that was never the case. I don't know if Bezos ever made factually incorrect claim, that he knew was false, to raise capital.

 

Such lies are not the same as consistently overestimating future production levels because investors treat, or should treat, a statement of fact issued by a company differently than forward looking projections. There's a HUGE difference between saying "our company has $1B cash on the balance sheet today" VS "We predict our company will have $1B cash on the balance sheet by next year."

 

I think the only reason Theranos' BoD were consisted of accomplished heavy weights (rather than experts in the medical field) was to keep the story alive. A BoD consisting of medical experts would smell Holmes' BS must faster than Kissinger and Mattis might. At the same time, having Kissinger, Mattis and Boies on the Board gives a much stronger aura of legitimacy which would then allow Theranos to fly under the radar for as long as possible. Textbook definition of a "con artist."

[BG2008]

 

You guys are missing the point as usual. Sometimes founders have to create grand stories to raise the money to finance the work to get to the point that they aren't stories anymore. So many great companies have been built this way that it's very typical of a value investor to jump all over the leaders who fail to make the transition. Reflexivity is real and Holmes did not prove as skilled at mastering this art as Musk, Trump or Bezos.

 

 

Classic case of value investors missing the point, again.

 

So is it fraud to use your marketing skills to highlight the amazing stuff you've been able to accomplish, so that people will want to continue to finance you despite ongoing operating losses? A lot of people are jumping ship at Tesla. That's usually not a great sign. Maybe Google will buy Tesla if public perception falters and finance Musk. It'd be more sensible than any other project.

 

Or maybe the public will continue to finance him so long as he continues performing technological marvels, operating performance issues be damned, and one day the infrastructure will really come together. Who knows?

 

 

 

 

There's a big difference between selling a future dream/vision and lying about past and present facts. I think that's where Theranos crossed the line. If you read SEC's complaint, they highlight multiple instances of egregiously false statements originating from the top, just to keep the story alive. Theranos went beyond simply "highlighting the amazing stuff." It began fabricating facts that it knew didn't exist. For instance, Holmes told that Theranos’ technology had been deployed by the DOD in Afghanistan when that was never the case. I don't know if Bezos ever made factually incorrect claim, that he knew was false, to raise capital.

 

 

Such lies are not the same as consistently overestimating future production levels because investors treat, or should treat, a statement of fact issued by a company differently than forward looking projections. There's a HUGE difference between saying "our company has $1B cash on the balance sheet today" VS "We predict our company will have $1B cash on the balance sheet by next year."

 

 

I think the only reason Theranos' BoD were such accomplished heavy weights (that had nothing to do with the medical field) was to keep the story alive and to fly under the radar for as long as possible while arousing minimal suspicion. Textbook definition of a "con artist."

 

Lie about the future - No biggie

Lie about the past - Jail Time Likely

[BG2008]

I wonder what would've happened if they had a woman on the BOD.  Maybe another female would've smelled the bullshit?  That's a pretty crazy BOD of who's who. 

[DTEJD1997]

I wonder what would've happened if they had a woman on the BOD.  Maybe another female would've smelled the bullshit?  That's a pretty crazy BOD of who's who.

 

Perhaps a board packed with "big names" is a warning sign in of itself?

 

Maybe, just maybe, the puppet master of the scam is packing the board with "big names" to bamboozle the weak minded. 

 

Further, what do all these "heavy hitters" know about high tech blood testing devices?  What do they bring to the OBD other than their names & reputation?  There are PLENTY of people who are competent or even good at running businesses that do not have "big names" and the $$$ that those names command.

 

Heck, maybe I've got a good new marketing pitch for a short fund?  Short the "big names"!

 

hahaha

[rb]

I wonder what would've happened if they had a woman on the BOD.  Maybe another female would've smelled the bullshit?  That's a pretty crazy BOD of who's who.

Yea, maybe a woman would have helped. Also maybe having a few more board members that weren't senile would have helped also. Half that board probably consider it a personal victory if they survived a board meeting.

 

I see that Mad Dog is also on that list. Now I don't doubt his ability to smoke an Iraqi division. But the idea that he would have anything to add in the area of blood testing is laughable. Blood letting is more his thing. Furthermore, as DETJD pointed out this more or less applies to everyone on the board. What a joke.