Theranos, the struggling blood testing company based in Silicon Valley, has landed a $100 million loan from Fortress Investment Group.
Citing an email sent to shareholders by Elizabeth Holmes, the founder and chief executive officer of Theranos, The Wall Street Journal reported the loan is subject to the company hitting product and operational milestones. The money will enable the company to avert a potential bankruptcy filing due to a depletion of what’s left of its cash.
The loan is backed by the company’s patent portfolio, and Fortress gets warrants for 4 percent of the company as part of the deal. According to Holmes, the loan is expected to give the company “sufficient” liquidity through 2018.
This isn’t the first distressed asset in which Fortress has invested — in fact, the investment firm has made a name specializing in that area of the market.
Theranos has raised a total of $900 million and was once a high-flying Silicon Valley startup. At its peak, the company had a valuation of $10 billion, but that all changed after an investigation by the Wall Street Journal led to questions about the technology behind the company and its internal practices. As a result, Holmes was banned by the Centers for Medicare and Medicaid Services from owning or operating clinical laboratories for two years. The company was also slapped with a lawsuit by investors and ex-partners who accused the company of engaging in fraud.
The Justice Department and the Securities and Exchange Commission continue to investigate into the company’s practices. Theranos still faces lawsuits by investors in California and Arizona, as well as consumer class-action suits.
In an email to investors, Holmes said the company was cooperating with federal investigations and that it would defend itself “vigorously” in the investors’ and consumers’ class-action lawsuits.