Bankruptcy Was Good for 23andMe

Sometimes a public company has a controlling shareholder who wants to take it private by buying out all of the other shareholders, and that’s always messy.1 The controlling shareholder will to some extent be negotiating with herself: She will want to buy the company for a low price, but the company’s shareholders will want to get a high price, but she’s the controlling shareholder and can vote for the low price. There are standard solutions to the problem, but they are only partial solutions:

In the past few months, I have written a few times about 23andMe Holding Co. as an illustration of these problems. 23andMe is a publicly traded genetic testing company that was once worth about $6 billion, but it has now fallen on hard times. Its founder, Anne Wojcicki, owns about 49% of the voting power of the stock, making her effectively a controlling shareholder. She offered to buy all the stock she didn’t own, to take the company private and fix its problems “outside of the short term pressures of the public markets.” But the board of directors, whose job was to find an “actionable proposal that is in the best interests of the non-affiliated shareholders,” didn’t think her offer was good enough.