23andMe Holding: Busted SPAC, CEO Wants Go-Private Transaction

I put out the call for reader ideas and as usual, received many good ones.  A couple intrigued me enough to start small positions, one of those is 23andMe Holding (ME) ($100MM market cap).  23andMe is a well known direct-to-consumer DNA kit company that went public in 2021 via a Richard Branson SPAC at a $3.5B valuation.  It came public with lofty expectations and a lot of hoopla, but it failed to create a sustainable business model beyond the one time novelty nature of getting your DNA sequenced.  The stock price has fallen 95+%.

23andMe was co-founded by Anne Wojcicki, she has an interesting backstory as a high profile Silicon Valley founder who enjoyed the spotlight when the company was a venture darling.  I imagine the fall has been challenging, her identity is tied to the company.  Back in April 2024, Wojcicki disclosed in an amendment to her 13D that she was exploring taking the company private:

On April 13, 2024, Ms. Wojcicki notified members of the special committee (the “Special Committee”) of the Board that she is considering making a proposal to acquire the Issuer in a potential go-private transaction. Ms. Wojcicki indicated that she was working with advisors and intended to begin speaking to potential partners and financing sources. Ms. Wojcicki stated that any proposal by her would be conditioned irrevocably upon the approval of the Special Committee and a majority of the unaffiliated stockholders of the Issuer. Ms. Wojcicki also indicated that she wishes to maintain control of the Issuer and, therefore, will not be willing to support any alternative transaction. There can be no assurance that the foregoing will result in any transaction or any other strategic alternative and or whether or when any of the foregoing may happen.

In July, she submitted her non-binding proposal for $8/share (split adjusted, the company did a 1-for-20 reverse split in October, trades for $3.75/share today).  The WSJ reported "directors wrote in a letter few days later they were disappointed because it offered no share-price premium and lacked committed financing.  The directors threatened to engage a consultant to find a sustainable business model if she didn't revise her offer quickly."  Then in September, the drama (its not often a $100MM market cap company gets repeated coverage in the WSJ) ratcheted it up further when the entire board (other than Wojcicki) resigned in unison:

Dear Anne,

We, the independent directors of the 23andMe Board, hereby tender our resignations, effective immediately.

After months of work, we have yet to receive from you a fully financed, fully diligenced, actionable proposal that is in the best interests of the non-affiliated shareholders. We believe the Special Committee and the Board have provided ample time for you to submit such a proposal. That we have not seen any notable progress over the last 5 months leads us to believe no such proposal is forthcoming. The Special Committee is therefore unwilling to consider further extensions, and the Board agrees with the Special Committee’s determination.

While we continue to wholeheartedly support the Company’s mission and believe deeply in the value of the personalized health and wellness offering that you have articulated, it is also clear that we differ on the strategic direction for the Company going forward. Because of that difference and because of your concentrated voting power, we believe that it is in the best interests of the Company’s shareholders that we resign from the Board rather than have a protracted and distracting difference of view with you as to the direction of the Company.

We are proud of what 23andMe has achieved in pioneering direct access to genetic information, and we have been honored to have had the opportunity to be part of those efforts.

 A few weeks later, Wojcicki amended her 13D again to include the below language:

In response to a request from the then-current Special Committee of the Board, I stated that I would consider third party takeover proposals for 23andMe. Whether I would ultimately accept such a proposal remained within my discretion. In the interim period, based on subsequent developments, it has become even clearer to me that the best path forward for the Issuer is for me to take the company private. Accordingly, in order to update my prior statement and avoid any confusion in the market, I am no longer open to considering third party takeover proposals for the Issuer. I remain committed to completing an acquisition of 23andMe. Towards that end, the Issuer is working diligently to repopulate the Board of Directors so that any proposals to acquire the Issuer can be properly considered.

Wojcicki likes to tout that she's unconventional, but this is very direct language and surprising to see in an SEC filing.  To help facilitate this potential go-private offer, three new independent board members were appointed at the end of October, none of which appear to own any shares.

In November, 23andMe shut down their drug discovery and development business (one business model they've tried out is that of a regular-way biotech, they had two clinical trials running) and laid off 40% of their workforce in order to meet their goal of getting to cash flow positive in their traditional consumer DNA kit business.  Progress is being made, but potentially not fast enough, in their 9/30 10-Q, the company had a going concern disclosure, they need to raise capital in order to fund operations for the next 12 months.  This is a time sensitive trade, although 23andMe doesn't have any conventional debt (they do have a fairly big fancy operating lease), they're running out of cash quickly.

The bet here is that Wojcicki is able to take the company private with the re-constituted board presumably picked as friendly.  Dealing with public shareholders and the bad press associated with a stock down so substantially is bad for the brand (both her and 23andMe).  I'm sympathetic to the view 23andMe might have some valuable data, brand (they own one of countless online pharmacies getting into compounded GLP-1s) and IP that might be valuable to someone, especially in the current artificial intelligence hype cycle.

Other thoughts/notes:

• Anne Wojcicki rolled over all of her equity into the SPAC, contributed $25MM to the PIPE at $200 (split adjusted) per share and hasn't sold any of her shares since.  She appears to be a true believer in the company and its mission, although she's likely fabulously wealthy after previously being married to Google co-founder Sergey Brin for years.
• She owns 22.8% of the stock and 49.9% of the vote due to the dual class share structure, Class A (the publicly traded class) has 1 vote and the Class B shares have 10 votes.  No other significant holders remain, Branson is long gone, etc. 

Disclosure: I own shares of ME