Theranos founder’s rise and fall provides an interesting
case study –
“Forbes made quite
a stir last week, by reporting that it had cut the estimated net worth of
Theranos founder Elizabeth Holmes from $4.5 billion to…zero. Since Forbes is
widely regarded as the authority on the size of private fortunes, this was a
dramatic move. How could so much wealth disappear so fast?
One reason is that
wealth represents a guess about the value of future earnings. When Theranos’
blood-testing technology was found not to fulfill its early promise -- some
suggested it was fraudulent to begin with -- people realized that the company
wouldn’t have nearly as much earnings power as expected. That sharply cut the
value of the company. Since so much of Holmes’ wealth was tied up in her own
company’s stock, that meant she got much poorer.”