23andMe (NASDAQ: ME) stock price has had a spectacular collapse and is at risk of being booted from NASDAQ. After peaking at over $16 in 2021, the stock has dropped to just 71 cents, making it one of the worst-performing companies. Its market cap has plummeted from over $6 billion to less than $360 million.

23&Me, a company that does genetic testing, has had a remarkable fall from grace in the past few years. Its revenue growth has moved in reverse, cash burn has increased, and its outlook has become dim after the end of its partnership with GSK.

The most recent results revealed that the company’s revenue crashed by 34% in the previous quarter to just $50 million. Its total operating expenses retreated slightly to $101 million, helped by three rounds of job cuts. In all, its net loss jumped to $75 million.

23andMe faces numerous challenges but I believe that its most important issue is its business model. In this model, the company charges between $119 and $229 to do genetic testing. The problem with this is that most customers check their results once and never come back. 

This, coupled with the fact that the business is highly competitive, poses more risk. It is also unclear how many people want this DNA data in its key markets like in the United States and UK.

23andMe understands this problem, which explains why it has launched a subscription package and moved into the drug discovery business.. For example, its Total Health subscription costs $99 per month. Customers receive exome sequencing, blood testing, and access to clinicians. I don’t see this service having many users in the long term.

The company has also moved into the drug discovery business, which is a high-risk and high-reward sector. The challenge is that the process takes a lot of cost and takes many years. Unfortunately, the company does not have the resources to fund that program. It ended the quarter with $256 million in cash and no debt. 

These funds can only last it until 2025, meaning that it will need to raise cash. It is unclear how it will do that now that it has become a penny stock. With an equity value of over $300 million, the company has a small window to sell stock.

Therefore, with 23&Me, we have a company whose revenue is not growing and one that is losing loads of money. It also faces lawsuits because of its most recent data hacks, meaning that it could be ordered to pay millions of dollars.

If this happens, and depending on the amount it will be ordered to pay,  the likely solution will be for the company to file for bankruptcy. 

As I warned here, 23&andMe share price has numerous risks ahead. However, all hope is not lost for the company. For one, 23andMe’s founder and CEO is Ann Wojcicki, the wife of Sergey Brin, the co-founder of Google. Bloomberg ranks him as the 8th richest person in the world with a net worth of over $129 billion.

As such, there is a likelihood that, instead of going bankrupt, Ann can take it private through the support of her husband. This is mere speculation though and it is not clear whether such a transaction will happen. The other situation is where the stock goes through a short squeeze.

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