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23andMe, once a pioneer in direct-to-consumer (DTC) genetic testing, is now facing one of the most challenging moments in its history. The company is grappling with financial losses, a rapidly declining stock price, and recently announced a 1-for-20 reverse stock split. This move is seen as a last-ditch effort to stay listed on the Nasdaq exchange as its stock has plummeted to 28 cents per share. CEO Anne Wojcicki, who holds significant voting control due to a dual-class share structure, has expressed a desire to take the company private. But the real question remains: Can 23andMe turn things around, whether it stays public or goes private?

Financial Woes and Reverse Stock Split

The reverse stock split announced by 23andMe is a clear signal of financial distress. A reverse stock split consolidates shares, increasing the per-share price without affecting the company’s actual market capitalization. In this case, the company is attempting to raise its stock price to meet Nasdaq’s minimum price requirements and avoid delisting. However, this tactic doesn’t solve the core financial issues the company is facing—most notably, a declining revenue base and a negative operating profit.

In fiscal 2024, 23andMe’s revenue fell to $219.6 million, a nearly 27% decline from the previous year. With sales declining and its expenses outpacing revenues, the company has been struggling to find new revenue streams to compensate for the slowing demand in its core genetic testing business【12†source】【13†source】. Its stock has reflected this poor performance, consistently trading below $1 for months.

Can 23andMe Go Private?

Given the company’s troubles, Anne Wojcicki’s plan to take 23andMe private seems plausible, especially considering her 49% voting power. Wojcicki had already made a bid to buy the company at 40 cents per share, but it was rejected by the independent board members as too low and lacking committed financing【13†source】. If she can secure the necessary financing, taking the company private would give her more flexibility to restructure the business without the constant scrutiny of public markets.

However, going private won’t solve the company’s problems overnight. The genetic testing market is becoming saturated, and without significant changes, the same financial challenges that plague 23andMe as a public company will follow it into private ownership. Wojcicki would need to diversify revenue streams and potentially pursue controversial strategies, such as selling genetic data to law enforcement or insurance companies, to generate sustainable income.

Potential Even If 23andMe Goes Private

Despite its current troubles, 23andMe has potential as a private company if it can capitalize on its most valuable asset—its vast genetic database. This data holds immense value not only for consumers interested in ancestry but also for sectors like healthcare, pharmaceuticals, and insurance. For example, healthcare companies could use genetic data to improve diagnostics, develop personalized treatments, or identify genetic markers for diseases.

Additionally, pharmaceutical companies could use the data for drug development or clinical trial recruitment. However, drug development efforts under Wojcicki’s leadership have been slow and unproven, and this is an area where the company lacks expertise. Shifting focus toward data sales and partnerships with healthcare or biotech companies might be a more practical and lucrative strategy.

As a private entity, 23andMe could also explore riskier business models like partnering with law enforcement for forensic genealogy without the same level of public backlash that it might face as a publicly traded company.

What If 23andMe Stays Public?

If 23andMe remains public, it needs to take immediate steps to boost its survival rate:

1. Cost-Cutting: The company needs to aggressively cut costs, potentially by reducing its workforce and halting expensive initiatives that aren’t showing results, such as its in-house drug development efforts.
2. Diversification: The company should shift focus away from its saturated genetic testing market and diversify into healthcare services, personalized medicine, or partnerships with pharmaceutical companies. Selling data for research and personalized healthcare solutions would offer more stable revenue streams.
3. Transparency and PR Overhaul: To regain consumer trust, 23andMe must be transparent about how customer data is being used. Implementing clear opt-in policies for data sharing with third parties (including law enforcement) can protect its consumer base while opening new revenue opportunities.
4. New Leadership: Some argue that the current leadership under Wojcicki has been too lofty in its ambitions, pursuing drug development when 23andMe should have focused on maximizing its value as a data mine. Bringing in a new CEO with experience in turnaround strategies and activist board members known for corporate restructuring could help the company regain investor confidence.

Current and Future Financial Outlook

With declining revenues, increasing competition, and a shrinking consumer base, 23andMe’s current financial outlook is bleak. The reverse stock split may offer a temporary reprieve, but without fundamental changes, it’s unlikely to save the company in the long term. Financial analysts predict that if Wojcicki cannot secure financing to take the company private or doesn’t implement a dramatic turnaround plan, 23andMe could face insolvency within the next few years.

Going private could give Wojcicki the space to restructure, but it’s not a guaranteed solution. The company must find new revenue streams, improve operational efficiency, and restore trust with consumers and investors alike.

Summary

23andMe is at a crossroads, facing existential financial challenges that threaten its future. While a reverse stock split might stave off immediate delisting, the company’s survival will depend on whether it can diversify its revenue streams, cut costs, and secure new partnerships. If Anne Wojcicki succeeds in taking the company private, it could have more flexibility to pivot its business model—potentially selling genetic data to sectors like healthcare, insurance, and law enforcement. However, if the company remains public, it will need to move quickly to shore up its financials or risk fading into irrelevance. The next year will be crucial for the future of 23andMe.

Disclaimer:

The analysis and opinions expressed in this article are based on publicly available information and current events regarding 23andMe as of the date of publication. While every effort has been made to ensure the accuracy and reliability of the data presented, the financial landscape and strategic decisions of companies can change rapidly. Readers are encouraged to conduct their own research and consult with financial or legal professionals before making any investment or business decisions related to 23andMe or any other company mentioned. The article does not constitute financial, investment, or legal advice, and the author(s) and publisher disclaim any liability for actions taken based on the content provided.