💉 The Theranos saga

Thursday, September 9, 2021 by Robinhood Snacks | Disclosures
That skincare insider glow [stock_colors/E+ via GettyImages]

That skincare insider glow stock_colors/E+ via GettyImages

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Hey Snackers,

The four-day work week is now the eight-day office year: design platform Canva says employees will only need to come to the office eight days a year.

Stocks dipped yesterday as investors worried about still-high US Covid cases.

Blood
1. Theranos saga: the rise, the fall, and the trial of disgraced founder Elizabeth Holmes

Not a chapter in the Twilight saga... but this story features blood, drama, and bad actors. Yesterday kicked off the trial of Elizabeth Holmes, the disgraced founder of blood testing startup Theranos. The Theranos saga has spawned a book, a documentary, a miniseries, and an upcoming movie — but we're Snack-ifying it.

  • The company... was seen as revolutionary. Theranos claimed it had devised blood tests that, using only a few finger pricks of blood, could detect hundreds of health conditions from cancer to high cholesterol — and make lab testing more accessible.
  • The founder: Holmes dropped out of Stanford at 19 to start Theranos, grew it to a $9B valuation, and became the youngest female self-made billionaire. She saw herself as the female Steve Jobs, even sporting the black turtleneck.
  • The come-up: Theranos raised $700M+ from big investors, and had partnerships with companies like Walgreens, which planned to open Theranos testing in-store.
  • The scrutiny: In 2015, scientists started raising questions about Theranos' secretive testing tech, and the FDA began investigating. Then, a bombshell WSJ report found that Theranos was running its samples through the same machines used by traditional blood-testing companies, since its own machine wasn’t accurate.
  • The fall: In March 2018, Theranos and Holmes were charged with "massive fraud" by the SEC for allegedly lying to investors and customers. Ramesh Balwani, Theranos’ former president and Holmes’ ex-boyfriend, is facing the same charges in a trial set for 2022. Both have pleaded not guilty.

The trial... is high stakes. If convicted, Holmes faces up to 20 years in prison, plus $2.7M in fines, plus restitution to victims. Think: investors who lost money, and thousands of patients who were wronged by Theranos — like people who received false HIV-positive results. The trial is expected to last three months, and legal experts say the prosecution has a strong case.

THE TAKEAWAY

Holmes is a cautionary tale... To the "move fast and break things" ethos of Silicon Valley culture. Recent SV falls-from-grace share one feature: highly charismatic founders who sold investors on larger-than-life ideas. Think: WeWork's Adam Neumann and Nikola's Trevor Milton. But it's rare for a CEO to face trial and 20 years in jail.

Pie

Making Costco blush... Direct-to-consumer beauty buyer’s club Beauty Pie just raised $100M at a reported $1B valuation. Beauty Pie's self-described "Sephora meets Costco" model gives e-shoppers access to marked-down products from the same factories that supply premium cosmetics companies.

  • For $59/year, BP members can buy skincare, makeup, and fragrance goodies for a fraction of their “typical” price. Think: Triple Hyaluronic Acid Elastic Lifting Eye Serum for $12.38 instead of $50.
  • Last year, BP’s members doubled — and so did its sales.

Scrub away the makeup markup... BP founder Marcia Kilgore is the ultimate beauty insider — she also founded Bliss, Remède, and Soap & Glory. Kilgore knows makeup markups are huge — typically 10X the product's production cost. Beauty Pie strips away marketing frills to focus on competitive pricing.

  • Members first: On its site, BP sells the same products to non-member at “typical” full prices — while subscribers pay special “insider prices.”
  • Community vibes: BP's website features members' favorites, like the Wonderscrub Face Polish, and includes BTS industry tips.
THE TAKEAWAY

Shoppers want insider access… and insider deals. Consumers are used to paying retail prices for almost everything, but businesses like Costco and Beauty Pie give them wholesale access. That can inspire long-term loyalty: Beauty Pie’s customer retention rates are 20X higher than other D2C beauty companies — on an elite list of companies that have hit 90%+ member retention rates, including Costco and Amazon.

What else we’re Snackin’
  • Sunny: The Biden admin is calling for solar energy to power nearly half of the US electric grid by 2050, up from just 3% now.
  • Werk: The US added 749K new job openings in July, for a record 10.9M openings. Still, 8.4M Americans are unemployed.
  • Leggy: Lululemon shares surged 14% yesterday after the athleisure icon reported a quarterly profit and expectation-stretching sales.
  • SOS: After its IPO was stalled by Chinese regulators, TikTok-owner ByteDance is in talks to take out $4B in bank loans.
  • Woof: As competition against rivals like Chewy heats up in the $50B pet health industry, Petco is expanding its subscription service to cover all dogs.
  • Later: PayPal agreed to buy Japanese "buy now, pay later" company Paidy for $2.7B to compete against Affirm, Klarna, and Afterpay in the BNPL boom.
Snacks Daily Podcast

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Thursday
  • Weekly jobless claims
  • Earnings expected from Affirm, Riskified, Traeger, Dave & Buster's, and Zumiez

Authors of this Snacks own shares of: Amazon and Google

ID: 1830610