Good morning. The fortunes of genetic-testing company 23andMe have gone from bad to worse, and now the company is heading to full-blown bankruptcy.
The company announced on Sunday that it voluntarily filed for Chapter 11 proceedings in the U.S. Bankruptcy Court for the Eastern District of Missouri, with the goal of finding a buyer that can maximize what’s left of its business. CEO Anne Wojcicki has resigned, in a mutual agreement with the company, and will continue to serve as a member of 23andMe’s board.
It now falls to the company’s chief financial and accounting officer, Joe Selsavage, to take on the role of interim CEO. Selsavage joined 23andMe in November 2021 through the acquisition of Lemonaid Health, where he was also CFO. He has over 25 years of experience in accounting and finance across multiple organizations.
As temporary CEO, the mess he inherits includes the fallout from a massive data breach, and corporate upheaval stemming from September when every one of 23andMe’s independent board members quit on the same day. This came after Wojcicki sought to buy the public company and take it private, and the seven independent directors disagreed. Roelof Botha, a managing partner of Sequoia Capital, and Neal Mohan, CEO of YouTube, are among the notable executives who stepped down.
The bankruptcy of 23andMe, once a $6 billion unicorn, going public in 2021, wasn’t entirely a surprise due to the turmoil at the cash-strapped firm, Fortune’s Lila MacLellan writes. You can read a timeline of events that shaped 23andMe’s trajectory here.
Credible communication
Prior to her departure, Wojcicki sought to rely on CFOs to help her guide the firm out of trouble. In October, the company announced three new independent directors—all former finance chiefs. And now as the new interim CEO, Selsavage will need to tap into his CFO skills as the company intends to “continue operating its business in the ordinary course throughout the sale process,” according to Sunday’s announcement.
“As interim chief executive, Joe Selsavage will be responsible for effectively communicating to investors the progress of finding a buyer,” Rick Warne, professor of accounting at the University of San Diego’s Knauss School of Business, told me.
When companies file for bankruptcy protection, they have to develop a plan to emerge successfully, Warne said. Typically, the choices are restructuring debt or seeking out a buyer, the path 23andMe has chosen, he said. Selsavage’s extensive financial background should prove beneficial in the process by “credibly communicating the company’s asset and liability values to potential buyers,” he said.
There is, however, another headwind that 23andMe must confront: The California attorney general has issued a consumer alert urging users of the biotech company to ask 23andMe to delete their data and destroy any samples of genetic material.
“We are committed to continuing to safeguard customer data and being transparent about the management of user data going forward, and data privacy will be an important consideration in any potential transaction,” Mark Jensen, chair of 23andMe’s board, said in a statement.
It’s an interesting conflict of interest for 23andMe, Sandra Matz, associate professor of business at Columbia Business School, told me. “The company is presumably only worth as much as the data they can sell on to a buyer,” Matz said.
She added, “If they truly want to protect their user’s privacy, they would have to change the default to ‘your data is being deleted until we hear back from you to keep it.'” Matz is the author of the book, “Mindmasters: The Data-Driven Science of Predicting and Changing Human Behavior.”
The 23andMe data breach from 2023 caused tremendous damage to its reputation and financial status, Warne said, adding that Selsavage must communicate clearly that customers’ data is secure—and that, if he does not, an already tough job will be even harder.
Sheryl Estrada
sheryl.estrada@fortune.com
Leaderboard
Alison Engel was appointed CFO of Spire Global, Inc. (NYSE: SPIR), a global provider of space-based data, analytics and space services, effective April 1. Engel has nearly two decades of experience as CFO. Most recently, she served as the CFO of LeaseAccelerator, Inc., a software-as-a-service company. Before that, Engel was the CFO and treasurer of the media company Gannett.
William Robert (Rob) Steele Jr. was appointed CFO of USA Rare Earth (Nasdaq: USAR), a magnet technology company, effective March 24. Steele has over 30 years of experience in finance and investment banking. Before joining the company, Steele was global CFO at Mujin Corp., a physical AI industrial robotics software company. Prior to that, he was a managing director at Bank of America Securities.
Big Deal
CFOs are focused on AI-enabled technology solutions and intelligent process automation for competitive advantage, according to Gartner, Inc. The firm has compiled a list of the 10 finance technologies expected to receive the highest future investment, based on a survey of 383 finance leaders. The top three are generative AI, machine learning, and cloud enterprise resource planning.
Half of the finance leaders surveyed are planning significant increases in generative AI spending, Mike Helsel, senior director analyst in the Gartner Finance practice, said in a statement. However, many say they face challenges with “fragmented automation technologies, which limit end-to-end process value creation,” Helsel said.
Going deeper
“Retail’s Tough Reality: Lessons from Joann’s Closure” is an episode of the Wharton Business Daily podcast featuring Cait Lamberton, a marketing professor at the Wharton School. Lamberton discusses the closure of Joann Stores and the broader challenges facing brick-and-mortar retailers. She examines the impact of bankruptcy, shifting consumer behaviors, and the rise of e-commerce.
Overheard
“When organizations pay on the top end of the market range, they end up with unusual loyalty, because people know that they can’t easily replicate the salary that they’re getting elsewhere.”
—Organizational psychologist Adam Grant told Fortune in an interview. Grant argues that it is an employer’s best interest to pay more as a way to cultivate a happier and more stable workforce as it’s an “investment in motivation and retention.”
