from Apple for a reason. He didn’t need the aggravation.
“OK, I’ll resign and I’ll leave these papers with you,” he said.
As Avie got up to leave, Don said there was something else they needed to discuss. Shaunak Roy, Theranos’s first employee and de facto cofounder, was leaving the company and selling most of his founder’s shares back to Elizabeth. She needed the board to waive the company’s rights to repurchase the stock. Avie didn’t think that was a good idea but told Don to have the board vote the motion without him since he was resigning.
“One more thing, Avie,” Don said. “I need you to waive your own rights to buy the shares.”
Avie was starting to get ticked off. He was being asked to put up with a lot. He told Don to have Michael Esquivel, Theranos’s general counsel, send over the requisite documents. He would review them but made no promises.
When the documents arrived, Avie read them carefully and concluded that, once the company itself waived its rights to repurchase Shaunak’s shares, it was entirely within his and other shareholders’ rights to buy some of them. He also noticed that Elizabeth had negotiated a sweetheart deal: Shaunak was willing to part with his 1.13 million shares for $565,000. That translated to 50 cents a share, an 82 percent discount to what he and other investors had paid more than a year earlier in Theranos’s last funding round. Some discount was warranted because Avie’s shares were preferred shares with higher claims on the company’s assets and earnings while Shaunak’s shares were common ones, but a discount that big was unheard of.
Avie decided to exercise his rights and told Esquivel he wanted to acquire the pro-rata portion of Shaunak’s stock he was entitled to. The request did not go down well. A tense email exchange ensued between the two men that stretched into the Christmas holiday.
At 11:17 p.m. on Christmas Eve, Esquivel sent Avie an email accusing him of acting in “bad faith” and warned him that Theranos was giving serious consideration to suing him for breach of his fiduciary duties as a board member and for public disparagement of the company.
Avie was astonished. Not only had he done no such things, in all his years in Silicon Valley he had never come close to being threatened with a lawsuit. All over the Valley, he was known as a nice guy. A teddy bear. He didn’t have any enemies. What was going on here? He tried getting in touch with other members of the board, but none would respond to his calls.
Unsure what to do, Avie consulted a friend who was a lawyer. Thanks to his Apple wealth, his personal balance sheet was bigger than Theranos’s, so the prospect of costly litigation didn’t really scare him. But after he filled his friend in on everything that had happened, the friend asked a question that helped him put the situation in perspective: “Given everything you now know about this company, do you really want to own more of it?”
When Avie thought about it, the answer was no. Besides, it was the season of giving and rejoicing. He decided to let the matter rest and to put Theranos behind him. But before doing so, he wrote a parting letter to Don and emailed it to his assistants, along with a copy of the waiver the company had pressured him to sign.
The brutal tactics used to get him to sign the waiver, he wrote, had confirmed “some of the worse concerns” he’d raised with Don about the way the company was being run. He didn’t blame Michael Esquivel, he added, because it was clear the attorney was just acting on orders from above. He closed the letter with
I do hope you will fully inform the rest of the Board as to what happened here. They deserve to know that by not going along 100% “with the program” they risk retribution from the Company/Elizabeth.
…
Warmly,
Avie Tevanian
| FOUR |
Goodbye East Paly
In early 2008, Theranos moved to a new building on Hillview Avenue in Palo Alto. It was the Silicon Valley equivalent of moving from the South Bronx to Midtown Manhattan.
Appearances in the Valley are paramount and for three years Theranos had been operating on the wrong side of the tracks. The “tracks” in this case were Route 101, otherwise known as the Bayshore Freeway. It separates Palo Alto, one of the most affluent towns in America, from its poorer sibling East Palo Alto, which