Print the page
Increase font size

Posted December 09, 2020

Ray Blanco

By Ray Blanco

How to Avoid the Next Theranos

Youve probably heard of Theranos by now.

The one-time Silicon Valley darling company has been the subject of books and documentaries. A Hollywood drama starring Jennifer Lawrence is in production.

Theranos, founded by Stanford dropout Elizabeth Holmes, was supposed to revolutionize the world with diagnostic tests that only needed a few drops of blood to perform dozens of blood tests less than a hundredth of whats required by traditional tests.

Only it didnt. Their technology didnt work, even though Holmes and company reportedly claimed it did, both to potential customers and patients, as well as investors.

Last week, we took a look at how to find the next Tesla.

Equally important is how to avoid the next Theranos.

Theranos was a private company. But its a mistake to think that publicly traded companies are immune to that sort of fraud. Chances are Theranos would have done quite well if it had gone public via a SPAC.

Its important to remember that Theranos fooled a lot of smart and influential investors and it lured famous, well-connected names to its board.

In hindsight, there were important red flags.

Theranos may have had prestigious board members, but none with expertise in biomedical engineering or medical device manufacturing. Most board members were politicians or retired military leaders. Likewise, while it attracted a spate of high-profile investors and venture-capital funds, health care-focused funds were notably absent.

They didnt want money from folks who were experts in the science of what they were trying to do.

So lesson No. 1 from Theranos is to know who youre investing alongside.

Luckily, as an investor in a publicly traded company, thats easy to do!

Large institutional investors are required to disclose their holdings and free resources like Yahoo! Finance and provide holder and ownership data. Taking a look at who the major owners are is always a good move.

In general, you want the professional investors who own big stakes to be experts in that companys field

Its not uncommon for a health care fund to employ analysts with MD degrees, or energy funds to employ folks with geology backgrounds. These specialists can add a lot of context around how a small companys tech holds up to scrutiny.

Another super-important takeaway that many folks miss about Theranos is that it wasnt an outright Bernie Madoff-style fraud.

Researchers at Theranos were actively working on developing microfluidic blood tests the company was just failing miserably and misrepresenting their progress.

Thats a far bigger challenge for regular investors to spot.

And its another good reason why its so important to pay attention to who youre investing alongside as an emerging-tech investor.

My guess is thats a step that most investors never think to take. But its free and incredibly easy to check for any public company.



Jonas Elmerraji, CMT

Warning: America Is Under Attack

Warning: America Is Under Attack

Posted June 10, 2021

By Jonathan Rodriguez

Due to a set of recent cyberattacks, businesses, consumers and the government are spending billions to shore up their digital defense against cybercrooks. That’s why today, I’d like to revisit the one cybersecurity stock you need to take advantage of this trend.
Bitcoin Hacked!?

Bitcoin Hacked!?

Posted June 09, 2021

By Jonas Elmerraji

The Colonial Pipeline saga isn’t done yet. The feds just announced that they successfully seized $2.3 million of the $4.4 million ransom paid in Bitcoin last month… but isn’t Bitcoin supposed to be untraceable?
This Company Just Broke Amazon

This Company Just Broke Amazon

Posted June 08, 2021

By Ray Blanco

A good chunk of the internet went dark this morning. Anyone that tried to access Amazon, Spotify, Reddit, The New York Times, the BBC… got a big, fat error message. And that’s...
What the New Alzheimer’s Drug Means for You

What the New Alzheimer’s Drug Means for You

Posted June 07, 2021

By Ray Blanco

This morning, the FDA approved its first Alzheimer’s drug in nearly 20 years. This is huge news for the biotech industry and shows that there’s hope for treating the disease. With this...
Asia’s Chokehold on U.S. Manufacturing

Asia’s Chokehold on U.S. Manufacturing

Posted June 04, 2021

By Ray Blanco

Now that the economy is reopening, we’re starting to feel the effects of the shutdown. And one of the most notable industries to be affected is semiconductor producers. Today we look at what’s causing the shortage as well as solutions to make it so it never happens again.
MUST READ — Is Ford Motor’s Stock a Smash Hit or "Trash It"?

MUST READ — Is Ford Motor’s Stock a Smash Hit or "Trash It"?

Posted June 03, 2021

By Jonathan Rodriguez

In this week's installment of Stocks That Rock, J-Rod is taking a look at what's on your watchlist.