World's youngest self-made female billionaire owes her company $25 million

The WSJ quoted a source close to the matter as saying that the founder of blood testing company Theranos – Elizabeth Holmes still owes the company 25 million USD.

Information about Holmes' debt to Theranos was revealed in a document Theranos sent to a group of shareholders. Theranos is seeking to exchange Holmes' shares in exchange for a commitment from the group of shareholders not to sue the company or its executives.

The $25 million Holmes owes Theranos stems from an agreement she made with the company that allowed her to exercise stock options without paying up front. She also agreed to repay the money later.

The source said it was unclear when the agreement was made. Theranos has the right to forgive Holmes’ debt or cancel the shares. Holmes has not sold any shares.

Elizabeth Holmes was once the world's youngest self-made female billionaire. Photo: Makers

Nell Minow, vice president of corporate governance consultancy ValueEdge Advisors, said this is a common way to incentivize executives to deliver the best value to shareholders. Private companies like Theranos often lend to senior executives in such arrangements, said Charles Elson, a management professor at the University of Delaware. Public companies are prohibited from providing financial support to executives to exercise options.

Investors who agree not to sue Theranos will receive a large chunk of Holmes’s stake. She owns more than 50% of the company. Investors will have until April 14 to decide whether to accept the deal.

Holmes founded Theranos in 2004. She has been described as a workaholic and has a very strict lifestyle. At one point, Theranos was valued at $9 billion, making Holmes the youngest self-made female billionaire in the world with a net worth of $4.5 billion.

However, since October 2015, the company has been accused of having inaccurate results with its equipment. In July 2016, Holmes was banned by US authorities from owning or operating any laboratory for at least two years. Payments that Theranos would have received from the government's Medicare and Medicaid programs were also canceled. Theranos had to close all of its laboratories and lay off hundreds of employees.

They are also facing a series of lawsuits over claims of hyping their technology. The lawsuits seek a total of $240 million in damages, while Theranos currently has only $150 million left.

Forbes estimates that when Theranos assets are liquidated, investors (holding preferred stock) will be paid first. Meanwhile, Elizabeth Holmes only holds common stock. Therefore, her 50% stake in Theranos is almost worthless, causing Holmes to be dropped from this year's list of the world's billionaires.

According to VNE