Good morning. Andrew Nusca here, filling in for Alan.
It’s not every day that the U.S. Securities and Exchange Commission steals the limelight from the country’s colorful chief executive. Yet that’s precisely what happened on Wednesday when the federal agency announced that it had reached a settlement with Theranos CEO Elizabeth Holmes over charges that the company raised more than $700 million from investors while allegedly deceiving them about the capabilities of its blood-testing technology.
The deal forces Holmes to give up voting control of the 15-year-old company she founded, compels her to pay a $500,000 penalty, and bans her from being an officer or director of any public company for 10 years. Though Theranos neither admitted nor denied wrongdoing, the settlement is an astounding rebuke for a 34-year-old college dropout described by some as “Silicon Valley’s first female billionaire startup founder.” (On paper, of course.) It’s also a distressing setback for perennially underfunded female founders who run their businesses the right way.
Much ink has been spilled about Theranos over the last four years, including by this publication. But the SEC may have said it best in a statement following the settlement: “Innovators who seek to revolutionize and disrupt an industry must tell investors the truth about what their technology can do today, not just what they hope it might do someday.” In other words, the fake it ‘till you make it playbook simply won’t fly—especially when you’re toying with customers’ bodily fluids.
A silver lining: The Theranos debacle seems to have prompted more venture capitalists to demand peer-reviewed studies before investing in biotech companies. (It’s worth remembering that Silicon Valley’s top firms did their due diligence on Theranos and passed. Defense Secretary Jim Mattis, who served on the Theranos board, not so much.) That’s good. Healthcare needs more bureaucracy-busting ideas than ever before. Just, you know, real ones. (Subscribe to our Brainstorm Health newsletter to stay apprised.)
More news below.
President Donald Trump’s new chief economic adviser, economist and TV personality Larry Kudlow, has hit the ground running. No longer troubled by Trump’s steel and aluminum tariffs, Kudlow says he is now “on board” with them. He says China “needs a comeuppance on trade,” and urged the Federal Reserve not to raise interest rates too much. “Growth is not inflationary. Just let it rip, for heaven’s sake,” he said. Bloomberg
The consumer goods giant Unilever has decided to site its corporate base in the Netherlands rather than the U.K. Even though Unilever says the decision won’t result in any jobs cuts in the U.K., it’s still a blow to the British government, which is trying to convince everyone that Brexit won’t make the country less attractive. The company currently has two headquarters, in Rotterdam and London, due to having two parent companies and a listing in each country. Unilever said it opted for Rotterdam because its Dutch entity represents more than half the group’s overall share capital. Financial Times
Toys Were Us
Toys ‘R’ Us has told its employees in the U.S. that it will sell or close all of its stores in the country. The question now is whether someone will buy some of those bricks-and-mortar assets and keep the business going, albeit in a new form. Crushed by debt, the firm announced major store closure plans back in January, but the situation seems to have only gotten worse since then. Fortune
Venezuelan instability could lead to a supply shortage in the international oil market, the International Energy Agency (IEA) has warned in its latest monthly report. Venezuelan output has been falling as a result of the country’s economic crisis. “Without any compensatory change from other producers it is possible that the Latin American country could be the final element that tips the market decisively into deficit,” the IEA said. CNBC
Around the Water Cooler
Orb Media has conducted another study to tell us that we’re drinking tiny particles of plastic. Last time it was tap water; this time it’s bottled water from companies such as Nestle and Coca-Cola. Some companies dispute the levels of contamination found in the research, but it seems none of the surveyed brands weren’t selling water with microplastics in it. The health risks remain unknown, but the World Health Organization is now looking into it. Fortune
John Feffer of the Institute for Policy Studies is very worried about the implications of having Mike Pompeo as secretary of state, and Gina Haspel as CIA director. In a piece for Fortune, he described Pompeo as a “hawk’s hawk” and compares him with George W. Bush’s vice president, Dick Cheney. “Like Cheney, Pompeo will be well positioned to work behind the scenes to militarize foreign policy and resurrect a counterterrorism policy that flouts international law,” he writes. Fortune
China’s very popular WeChat messaging and payments app is now banned from phones used in the Australian military, as it does not “meet Defense standards.” In China, this is being viewed by some as a political move, in line with pushback against Chinese technology elsewhere. “It is obvious that Australia is standing on the same side as the U.S. and follows its steps. The WeChat ban is more a political behavior to show its support for the U.S.,” Li Yi, chief fellow at the Shanghai Academy of Social Sciences, told the South China Morning Post. SCMP
Saudi Crown Prince Mohammed bin Salman has, according to unnamed U.S. officials, been hiding his mother from his father, King Salman, for the last two years. This is supposedly because Princess Fahda bint Falah bin Sultan bin Hathleen might oppose MBS’s ongoing power grab in the kingdom, by using her influence with the king. The Saudi embassy denied that the princess was being separated from her husband, but, according to NBC News, U.S. officials “said the king has told people around him that he misses her and apparently does not know her true location or status.” NBC