23andMe’s DNA results have come in, and we have some bad news: The company is failing.
The beleaguered genetic testing kit company filed for bankruptcy last night, and CEO and founder Anne Wojcicki resigned. The news didn’t exactly come as a shock to those following 23andMe’s journey from tech unicorn with a market cap of $43.5 billion when it went public to a struggling firm worth less than $25 million.
“We have had many successes but I equally take accountability for the challenges we have today,” Wojcicki wrote in a post on X addressing the bankruptcy.
Championship DNA
Founded back in 2006, 23andMe shot to mainstream popularity with its home testing kits that revealed people’s genetic history. But ever since going public via SPAC in 2021, 23andMe’s stock has fallen as it struggled to nail down a profitable business model. SPACs, or special-purpose acquisition companies, are shell companies that go public and then acquire or merge with private firms, giving them a shortcut to public markets without all the paperwork of a traditional IPO.
Things went from bad to worse for the company last September, when the entire board resigned all at once as Wojcicki tried to Uno reverse its SPAC and take 23andMe private.
23andMe’s flameout is a cautionary tale about going public before having a solid business plan. But 23andMe isn’t the only company that could tell you that sad story: After a SPAC heyday shortly following the pandemic, many companies that utilized SPACs to hit the market have flamed out hard.
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You may recognize legendary corporate meltdowns like WeWork, Virgin Orbit, Nikola, Faraday, and Lordstown Motors—all of which went public via SPAC. And the struggling ex-SPAC club is not an exclusive one to join: Of the 450 former SPACs that went public post-pandemic and are still trading today, nearly half have erased over 90% of their value, according to Bloomberg Intelligence.
23 problems but a SPAC ain’t one
But if there’s one thing that Wall Street loves even more than inhaling a Sweetgreen salad in a soulless corporate tower, it’s giving dubious ventures a second chance.
SPACs are the latest example: Even after the epic failure of many of the companies that marked the first SPAC boom, the method of going public is back in vogue.
We’re about to hit a four-year high in SPAC deals, according to data from Renaissance Capital. And some of the biggest “SPAC Kings,” like current Commerce Secretary Howard Lutnick, raised billions last year to get back into the SPAC game—even after their previous SPAC deals lost nearly all of their value.
So what’s resuscitating SPACs? AI hype, of course. Maybe tech firms considering using a SPAC to go public can ask ChatGPT to remind them what happened to WeWork.—LB