Elizabeth Holmes at TEDMED
Rupert Murdoch, executive chairman of News Corp, invested $100 million in Theranos, according to an article in The Wall Street Journal, which cited sources familiar with the matter. News Corp is the parent company of The Wall Street Journal. The fact that Murdoch was named as an investor is a particularly interesting twist in the Theranos saga since The Wall Street Journal published a series of articles that called into question the diagnostic company’s operation, starting in October last year.
Other Theranos investors named in The Wall Street Journal article include Riley Bechtel, chairman of construction business Bechtel Group, and Cox Enterprises. The article pointed out that early investors in Theranos, which was originally called Real Time Cures, paid 15 cents per share for their stakes, citing company filings. Investors who bought stock in the most recent funding round paid about $17 a share.
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Sandbox Industries, which manages investments for Blue Cross and Blue Shield insurance plans among other investors, also purchased shares in the business, The Wall Street Journal noted. Sandbox managing director Matt Downs told the paper that the Sandbox fund invested $1.5 million and the Blue Venture Fund invested $8.5 million in Theranos in 2010.
The new light on investors came as consumer rights class action law firm Hagens Berman Sobol Shapiro announced it filed a class action lawsuit on behalf of Theranos investors. It is the third complaint against the blood testing company in recent weeks and reflects the continued fallout from the business.
The class action, filed in the U.S. District Court for the Northern District of California, follows other suits against Theranos by former Theranos partner Walgreens and Partners Fund Management, a Theranos investor.
A news release from Hagens Berman Sobol Shapiro summarizing the complaint alleged that Theranos and its officers created a publicity campaign to raise billions of dollars for Theranos and to persuade investors to invest in Theranos, but all the while knew that their blood test technology was “a hoax”.
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Steve Berman, managing partner of Hagens Berman, railed against Theranos CEO Elizabeth Holmes in a statement. Although the suit named two plaintiffs — Robert Colman and Hilary Taubman-Dye — Berman claimed that thousands of Theranos investors were misled.
“Thousands of Theranos investors, including those who bring this class action, were spoon-fed continuous lies from the company’s CEO who touted the company’s ‘world-changing’ technology that would ‘revolutionize’ the industry,” he said. “After months of wooing investors to the tune of its CEO’s $9 billion net worth, Theranos’ bubble has burst, and we now see the truth – that Theranos’ promises were built on false statements and omissions.”
A Theranos spokeswoman declined to comment on the latest suit.
The Hagens Berman complaint seeks recovery for a proposed class of investors and accuses defendants of violating California securities laws, luring investors through fraud, deceit, and negligent misrepresentation, among other counts, the statement said.
Walgreens ended its contract with Theranos in June after the diagnostics company voided 31,000 blood test reports for Walgreens customers — one of several allegations in the Walgreens complaint.
The Centers for Medicare and Medicaid Services banned Theranos CEO Elizabeth Holmes from owning, operating or directing a clinical lab for two years. Yet, the diagnostics business has tried to reposition itself as a business that can offer products to labs and providers starting with the miniLab. Last month, Theranos shut down its clinical labs and direct-to-consumer blood testing services in a move affecting 340 workers in California, Arizona, and Pennsylvania.
