23andMe was once thought to be the biggest startup in Silicon Valley, but it has fallen quickly and hard. A few years ago, the genetic testing company was worth $6 billion. Now, it is facing dozens of class-action cases and the possibility of being taken off the Nasdaq stock market.
The company was hacked last year, and all of this is still happening because of it. Since then, the company has said it missed the data breach for more than five months, which gave hackers the chance to steal the ancestry information of about 6.9 million of its 14 million users. While genetic information wasn’t stolen, the company did say that the hackers got access to users’ display names and information from its DNA relatives feature. This information could include ancestry, birth years, locations, pictures, and links between relatives. The hack mostly went after people of Ashkenazi Jewish and Chinese background.
That’s what led to the legal threat the company is now facing. Lawyers for 23andMe were going to meet with about 20 lawyers who have launched class actions against the company on Wednesday to try to come to an agreement that would cover everyone.
23andMe Hack Lawsuits: Consolidation Battle Amidst Mounting Claims
Three dozen class-action lawsuits are being filed right now because of last year’s hack, and 23andMe has asked a judge to combine them all into one. A decision isn’t due until March, but one of the plaintiff’s lawyers in that group is asking to be named lead litigator right now before the cases are combined if they are consolidated at all. They want to avoid a quick settlement.
Lawyer Jay Edelson told Reuters, “This is not a case that should ever be settled in a race to the bottom.” It is not supposed for class action lawsuits to be used as a way for companies to avoid the effects of their wrongdoing.
The hacking event in 2023 made a lot of people worried about the company. To give you an example, one online ad for data said it had a huge collection of Ashkenazi Jews, even people whose ties to that group are less than 1%. Because of the real risks of violence against Jews both at home and abroad and the rise in antisemitic speech online, that post has made 23andMe members worry about their safety.
Significant drop in stock price: From $16 to $0.76 per share.
23andMe doesn’t have any money yet, but it’s getting close. Once, the stock was worth as much as $16 per share. These days, it’s worth about 76 cents per share. Nasdaq told the company in November that it would be delisted and gave it 180 days to get shares back above $1.
23andMe got about $1.4 billion in startup capital before it was hacked, but The Wall Street Journal says the company has already spent about 80% of that. A large settlement to the class-action lawsuits could use up a lot of the money that’s left. The Journal says the business is cutting costs so fast that it might not have any money left by next year.
Even though Anne Wojcicki, CEO of 23andMe, oversaw three rounds of layoffs last year, is still looking ahead. She wants to turn the company from a provider of ancestral data into a healthcare business that makes drugs and sells subscription health reports. She told The Journal, “It’s been harder than we thought it would be, but I don’t think we’ve carried out what the vision is yet.”
There is some news that could be good about that. Two of its drug options that could be used to treat cancer have made it to the early stages of testing on people. But it will be months before we can see the results of those studies.
But the drug business is pricey, and 23andMe hasn’t been able to find backers willing to give the company more money yet because its cash is running low.
The company’s stock price has fallen significantly, currently trading at around $0.76 per share. According to Nasdaq listing requirements, it needs to regain a share price of at least $1 within 180 days to avoid delisting.
Multiple class-action lawsuits are ongoing against 23andMe related to a data breach in 2023. These lawsuits could potentially drain the company’s resources and further impact its stock price.
Delisting would remove 23andMe from the Nasdaq stock exchange, potentially impacting its public image and access to capital. The long-term implications for the company are uncertain.