Will Theranos Valuation Go to Zero?

High-tech blood testing company Theranos had a valuation of $9 billion late last year, based on the belief it could revolutionize the way people are tested for disease, both in time and cost. In the meantime, privately held Theranos has been bombed by accusations and research results that sharply criticize its methods and effectiveness. Theranos may be the first big unicorn that has a drop in valuation to zero.

The most recent nail in the Theranos coffin is a report from the U.S. Department of Health and Human Services Center for Medicare and Medicaid Services. The media jumped on the results, and The Wall Street Journal and New York Times reported on the data on their front pages. By early Friday morning, Google News showed over a dozen reports on the problem from major media outlets. That is bound to grow as the day wears on.

The most damning report came from The Wall Street Journal, which has tracked Theranos’s problems for months:

The inspection report showed that 29% of the quality-control checks performed on the company’s proprietary blood-testing devices in October 2014 produced results outside the range considered acceptable by Theranos.

Presumably, that leaves the results useless to doctors, and the company’s credibility has been ruined.
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The prices of many unicorns, private companies with valuations of over $1 billion, have been cut recently. However, none of these appears to have a business model that has been rendered entirely useless. In the case of Theranos, that perception has begun to happen, if it has not happened entirely already. It is unimaginable that Theranos can rectify poor test results fast enough to regain a foothold the medical community, or with investors. It does not have any “side business” it can lean on to help save even a very small part of its valuation.

Theranos’s position as a viable company likely has ended, which might well drive its value to zero.