The struggle to determine the future of 23andMe has taken a turn with all of its independent directors resigning over differences with co-founder and CEO Anne Wojcicki, who wants to maintain control of the company and take it private but has yet to submit a fully financed proposal to do so.
The resignations announced Tuesday leave Wojcicki as the genetic testing company’s lone board member. Meanwhile, the clock is ticking as deadlines loom for 23andMe to regain compliance with rules for maintaining a listing as a publicly traded company.
When 23andMe went public in 2021 via a SPAC merger, its $10 per share stock price soon rose by more than 20%. The company has not seen such highs since. 23andMe has struggled with its vision as a business. The company’s main source of revenue continues to be offering genetic testing services to consumers. A much smaller part of the company’s business is allowing pharmaceutical companies to use 23andMe’s de-identified genetic data to aid in drug development.
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23andMe has never turned a profit and sales have been in decline. In fiscal 2024, the company reported $219.6 million in revenue, down nearly 27% from fiscal 2023. Its stock price has fallen accordingly. Last November, the Nasdaq put 23andMe on notice that it risked losing compliance with listing requirements due to a stock price that had fallen below the $1 per share threshold.
Wojcicki’s ownership stake in 23andMe is more than 20%. But thanks to a dual class structure in which certain shares have more voting power, Wojcicki’s combined stake gives her 49% of the voting power of the company’s total outstanding shares. In April, 23andMe announced that Wojcicki is considering a plan to acquire the shares she does not already own and take the company private. According to a regulatory filing, she told a board committee that she wishes to maintain control of the company and is unwilling to support an alternate transaction.
23andMe’s board formed a special committee comprised of independent directors tasked with reviewing strategic alternatives for the company that would maximize shareholder value — as is their duty. This committee would review forthcoming proposals, including Wojcicki’s. Her offer came at the end of July: 40 cents per share for the shares she does not own. The board’s letter in response noted that Wojcicki’s proposed price provides no premium to shareholders and it lacks committed financing. The board rejected the offer as “insufficient and not in the best interest of non-affiliated shareholders.”
The letter went on to ask Wojcicki to withdraw her previously stated intent to oppose an alternate transaction so the board can fully assess potential interest from third parties. But the special committee also acknowledged that Wojcicki’s funding sources may need more time for due diligence. The committee’s Aug. 2 response granted her “a limited amount of additional time” to submit a revised proposal with fully committed financing. In the letter sent to Wojcicki and disclosed publicly on Tuesday, the independent board members tendered their resignations, noting Wojcicki’s failure to submit a fully financed proposal.
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“That we have not seen any notable progress over the last five months leads us to believe no such proposal is forthcoming,” the letter said. “The Special Committee is therefore unwilling to consider further extensions, and the Board agrees with the Special Committee’s determination.”
The board members said that while they believe in the personalized health and wellness offering that Wojcicki has articulated, she and the board differ on the strategic direction of the company. Because of that difference and Wojcicki’s concentrated voting power, the board said it believed it is in the best interest of 23andMe shareholders that the board members resign “rather than have a protracted and distracting difference of view with you as to the direction of the Company.”
In an email sent to employees and included in a Wednesday regulatory filing, Wojcicki said she was surprised and disappointed by the board resignations but she remains committed to taking 23andMe private. She added that the company will immediately begin identifying independent directors to join the board.
“I continue to believe that we will be better positioned to achieve our mission and goals outside of the short term pressures of the public markets and that taking 23andMe private will be the best opportunity for long term success,” she said in the email.
The Nasdaq’s November 2023 notice about the deficient stock price gave 23andMe 180 days to regain compliance. The company was unable to do so. In May, the Nasdaq granted an extension to Nov. 4.
The mass board resignation triggered another delisting notice from the Nasdaq for different rules violations. One of the listing rules requires that the majority of a company’s board be comprised of independent directors. 23andMe is also in violation of rules for audit and compensation committees, each of which must be comprised of independent directors. In a Wednesday regulatory filing, 23andMe said the Nasdaq’s letter states the company has until Oct. 3 to submit a plan to regain compliance with these rules. If the Nasdaq accepts that plan, it may grant 23andMe up to 180 days to provide evidence of compliance.
In the meantime, 23andMe’s stock will continue to trade on the Nasdaq. Its closing stock price on Wednesday was 34 cents.
Photo: baona, Getty Images