Anne Wojcicki’s Ambitious Attempt to Take 23andMe Private
23andMe CEO Anne Wojcicki has made significant efforts this past year to transition the DNA testing company into private ownership, clearly stating her opposition to any potential sale to outside parties. Although Wojcicki later moderated her stance, her determination to acquire the company she co-founded remained resolute. Recent attempts over the last month to gain the board’s approval for her proposals were unsuccessful. As a result, 23andMe is now taking steps to sell its assets while under bankruptcy protection.
Significant Leadership Changes Amid Bankruptcy Filing
The Chapter 11 bankruptcy filing announced on Sunday ushered in substantial shifts within the company’s leadership. Wojcicki has stepped down from her position as CEO, although she will continue to serve on the board. In her absence, Chief Financial and Accounting Officer Joe Selsavage has been appointed as the interim CEO, taking on enhanced responsibilities to steer the company during this tumultuous period.
Revenue Challenges: Declining Income from Genetic Testing Services
23andMe primarily generates revenue through the sale of genetic testing services to consumers. Additionally, the company has formed partnerships with pharmaceutical companies, leveraging de-identified genetic data to support their drug discovery efforts. However, this service never became a major revenue stream. For the nine months ending December 31, 2024, 23andMe recorded total revenues of $144.7 million, reflecting a nearly 7% decrease compared to the previous fiscal year. In the fiscal year concluding March 31, 2024, total revenue was reported at $219.6 million, showing a significant 27% decline from the previous year. The company attributes this downward trend in revenue primarily to reduced sales volume of its test kits.
Stock Performance and Market Challenges Following SPAC Merger
When 23andMe went public through a SPAC merger in 2021, the stock debuted at $10 per share. However, the company’s stock has faced a consistent downward trajectory over the past year. The recent bankruptcy filing follows nearly a year after Wojcicki announced her intentions to take the company private by acquiring the shares she does not already own, which has further complicated the company’s financial landscape.
Board Reactions and Strategic Considerations on Ownership Offers
In response to Wojcicki’s proposal, the 23andMe board established a special committee to evaluate her offer. The board, tasked with representing the interests of all shareholders, turned down her bid of 40 cents per share. Although another company might have been willing to offer more, Wojcicki’s ownership of class B shares, which hold greater voting power than class A shares, would allow her to obstruct any competing offers. The board communicated to Wojcicki that her proposal did not include a premium for shareholders and lacked committed financing.
High-Profile Board Resignations and New Appointments
In September of the previous year, seven members of the 23andMe board resigned, citing differences with Wojcicki regarding the company’s strategic direction, which left her as the only board member. In October, the company appointed three new independent directors to comply with Nasdaq regulations requiring a majority of independent board members.
Exploring Strategic Alternatives for Company Restructuring
The newly appointed directors, who also joined the special committee, announced in late January that they would explore strategic alternatives. These alternatives could include a potential sale of 23andMe, a merger, or the divestiture of the company’s assets. Wojcicki indicated that she would not oppose these discussions this time around.
Wojcicki’s Evolving Position on Third-Party Acquisition Proposals
In a regulatory filing, Wojcicki stated, “Based on subsequent developments in the interim period since that statement, I am revising my statement to indicate my willingness to consider third-party takeover proposals for the Company or other strategic alternatives that may be in the best interests of the Company.” This shift in her perspective signifies a potential willingness to collaborate with external parties for the company’s future.
Failed Acquisition Attempts and Ongoing Commitment
Despite her newfound openness to selling 23andMe to an external buyer, Wojcicki’s ambition to acquire the company personally did not diminish. On February 20, she, along with New Mountain Capital, submitted a non-binding proposal to purchase all outstanding shares not held by Wojcicki or her associates at $2.54 per share. The investment firm expressed its readiness to fully finance this proposal, and both Wojcicki and New Mountain Capital were prepared to provide capital for 23andMe’s operations until the deal’s closure. However, this proposal quickly unraveled.
Subsequent Offers and Market Reactions from Shareholders
On February 28, New Mountain Capital informed Wojcicki that they were withdrawing their interest in the acquisition, according to a regulatory filing. Undeterred, Wojcicki presented another non-binding offer on March 2, this time at 41 cents per share, fully funded by her own resources. She later amended this proposal four days later, introducing a $2.53 per share contingent value right, which would trigger a cash payout based on the achievement of certain revenue milestones within the following three fiscal years.
Increased Offer and Shareholder Pushback
On March 10, Wojcicki enhanced her offer by pledging an additional $20 million to support 23andMe’s operations. However, indications surfaced that minority shareholders were not in favor of Wojcicki’s plan. Zentree Investments acquired more shares to increase its ownership stake to 13% of the company’s class A shares. In a regulatory filing related to this transaction on March 17, Zentree emphasized the need for minority investors to have a voice in the company’s decisions.
Minority Shareholder Advocacy for Fair Treatment and Management Accountability
The firm stated, “We seek to prevent the sale of the company at an unreasonable price and advocate for more prudent management of the company’s costs. Additionally, we appeal that Class A and Class B shares be granted equal rights. We urge the management to act in the best interests of all shareholders and to address any conflicts of interest between management and investors.” This statement underscores the increasing tension and advocacy within the shareholder community.
Bankruptcy Proceedings and Future Asset Sales
The bankruptcy case, numbered 25-40976, was filed in the U.S. Bankruptcy Court for the Eastern District of Missouri. During the bankruptcy process, 23andMe has indicated that it will continue operating its business under the supervision of the court. The company has secured a commitment from JMB Capital Partners for debtor-in-possession financing of up to $35 million to sustain its operations.
Plans for Asset Sales Under Chapter 11 Bankruptcy
23andMe intends to petition the court to initiate a process for the sale of substantially all of its assets under Chapter 11 of the bankruptcy code. With court approval, the company plans to solicit qualified bids over a 45-day period. Should multiple qualified bids be received, 23andMe will conduct an auction for its assets. The company has assured that any buyer must adhere to legal regulations concerning the treatment of customer data, and all transactions will remain subject to regulatory approvals.
Potential Impact of Bankruptcy Auctions on Asset Valuation
Typically, bankruptcy auctions result in significantly reduced prices for company assets. In its bankruptcy filing, 23andMe stated that its assets are valued between $100 million and $500 million, while liabilities are similarly estimated within that range. Notable creditors include National Genetics Institute, a subsidiary of Labcorp located in Los Angeles; marketing firm Jellyfish; and Blue Shield of California.
Leadership Restructuring and Board Developments
In addition to appointing Selsavage as interim CEO, the board has also designated Matt Kvarda, a managing director at consulting firm Alvarez & Marsal, as the chief restructuring officer. The board has further expanded its ranks by adding Thomas Walper, a former partner at Munger, Tolles & Olson, to serve as an independent director on both the board and the special committee.
Stock Market Response and Future Implications for 23andMe
As of Monday, 23andMe’s stock closed at 73 cents, marking a substantial decline of 59.2% from the previous Friday’s closing price. This dramatic shift reflects broader investor concerns about the company’s future and its ongoing struggles.
For the latest updates on litigation, regulation, deals, and financial services trends, subscribe to Finance Docket, a collaboration between Breaking Media publications Above the Law and Dealbreaker.
