23andme, the consumer genomics company, is seeking protection under Chapter 11 bankruptcy laws. This move is merely another step in their scheme to sell the company. This decision comes on the heels of a March 2023 data breach that impacted 6.9 million customers and a buyout offer that was turned down by Roark Capital.
The company has settled a class action lawsuit for $30 million to avoid going to trial. Included in the settlement, they will offer three years of identity monitoring to help safeguard customer information. The bankruptcy filing has been structured to allow for a sale of the company to be completed while it operates in bankruptcy.
Most importantly, 23andMe has obtained a $50 million commitment for debtor-in-possession (DIP) financing. This $35 million will fund the company’s operations while the company goes through the sale process. This interim financial agreement is meant to allow the company to fulfill their financial constraints while looking for a buyer.
The decision to pursue a sale through bankruptcy comes after 23andMe's board rejected a buyout offer from a private equity partner. Executive motivation While the timing raised eyebrows, Anne Wojcicki, co-founder and CEO of 23andMe, had been pushing for a buyout since at least last April. That brings the cut of their most recent offer, which values the company at just $11 million. This is much less than its approximate current value of $50 million.
The company's financial challenges mark a significant downturn from its peak in 2021 when its market capitalization stood at $3.5 billion after going public. In order to make the company more efficient, 23andMe announced a restructuring initiative. This program has led to a grizzly 40% cut of its labor force, affecting 200 staff. The company ended development of each of its therapies as a part of the restructuring.
According to the bankruptcy filing, 23andMe listed both assets and estimated liabilities in the range of $100 million to $500 million. This precarious financial state highlights the importance of a sound, strategic fix for the company’s long-term viability.
After a thorough evaluation of strategic alternatives, we have determined that a court-supervised sale process is the best path forward to maximize the value of the business. - Chair Mark Jensen
