Doomscroll News

Tag: Bankruptcy

  • How to Spot a Zombie Company

    Forget the daily stock market noise. The real story is in the rot that hollows out a company from the inside, long before the public ever knows. Today, we’re talking about the mechanics of corporate failure. We’ll explore how titans like Starbucks and Lowe’s can operate with negative shareholder equity, why the most respected corporate laws in Delaware might actually encourage risky behavior, and how a 6,000-to-1 pay gap is more than just a headline—it’s a symptom of a system on the verge of collapse.

    Doomscroll Dispatch
    Doomscroll Dispatch
    How to Spot a Zombie Company
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  • From FDA Milestone to Bankruptcy Auction: Three Shocking Lessons from the Lucira Health Saga

    During the COVID-19 pandemic, the at-home medical test went from a niche product to a household staple. With a quick swab, we gained the confidence to visit family or board a plane. At the forefront of this revolution was Lucira Health, the company that developed the very first at-home COVID-19 test authorized by the FDA.

    Lucira was a pioneer, a symbol of rapid innovation when the world needed it most. Yet its story took a shocking turn. How could a company that achieved a historic public health milestone collapse into bankruptcy almost overnight? The saga of Lucira Health offers a series of stunning lessons about the harsh realities that exist between a breakthrough idea and market success.

    1. You Can Get Landmark Approval and Go Bankrupt in the Same Week

    Lucira Health’s collapse unfolded with the brutal irony of a Greek tragedy. On February 22, 2023, the company officially filed for Chapter 11 bankruptcy protection. It seemed like the end of the road for the struggling diagnostics firm.

    Then, just two days later, on February 24, 2023, the U.S. Food and Drug Administration (FDA) issued an Emergency Use Authorization (EUA) for Lucira’s most ambitious product yet: the first-ever over-the-counter test that could detect and differentiate between COVID-19 and Influenza A/B from a single sample. The approval was hailed as a monumental achievement.

    “Today’s authorization of the first OTC test that can detect Influenza A and B, along with SARS-CoV-2, is a major milestone in bringing greater consumer access to diagnostic tests that can be performed entirely at home.” — Jeff Shuren, M.D., J.D., director of the FDA’s Center for Devices and Radiological Health.

    So, how could a company achieve a “major milestone” while simultaneously going bankrupt? The answer lies in a perfect storm of regulatory delays and high-stakes financing.

    • Lucira’s Explanation: The company stated that the “protracted EUA process” for the combination test was incredibly costly, draining its resources and forcing it into bankruptcy before the approval finally came through.
    • The FDA’s Response: Officials countered that the delay was necessary. An early version of the test submitted by Lucira allegedly contained a “toxic substance” that made it unsuitable for home use. After a redesign, a subsequent version lacked sufficient clinical data to assess its performance, causing further delays.
    • The Hidden Condition: The final blow was a critical, undisclosed term in Lucira’s loan agreement with Silicon Valley Bank. The agreement reportedly required Lucira to secure FDA approval for its combo test by a specific deadline. Missing that deadline triggered a massive interest rate hike that made the company’s financial situation untenable.
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  • Information Blockade: A Flawed System, Tainted Actors, and the COVID-19 Response

    Information Blockade: A Flawed System, Tainted Actors, and the COVID-19 Response

    A defective system governing taxpayer-funded research, coupled with questionable corporate actors, hampered the nation’s ability to respond to the COVID-19 crisis. This information blockade had dire consequences, not only for public health but also for the very companies that were supposed to be at the forefront of innovation.

    The problem stems from a long-standing policy that has prioritized corporate profits over public access to critical information. In 2013, the Obama administration’s White House Office of Science and Technology Policy (OSTP), then led by Director John P. Holdren, issued a memorandum entitled “Increasing Access to the Results of Federally Funded Scientific Research.” This memo established a 12-month embargo period, allowing publishers to lock away taxpayer-funded research for a full year.This delay, a significant impediment in a rapidly evolving public health crisis, was a compromise to appease the highly profitable academic publishing industry.

    This dysfunctional system created a breeding ground for opportunism and mismanagement.

    • Delayed Access, Stalled Innovation: The 12-month embargo meant that crucial data on clinical trials, epidemiological models, and virology was often obsolete by the time it became freely available. This left not only the American public in the dark, but also the very companies developing diagnostic tools. The Freedom of Information Act (FOIA) process, which should have provided a swift path to public data, was also rendered ineffective, with requests for vital information stalled for years, well beyond the supposed two-week turnaround for a clear and present danger.
    • Corporate Casualties and Questionable Practices: The story of Lucira Health exemplifies the devastating consequences of this information bottleneck. The company, which developed a promising combined COVID-19 and flu test, was financed by Silicon Valley Bank (SVB) and Hercules Capital, securing a debt facility of up to $80 million. However, Lucira was forced to file for Chapter 11 bankruptcy after a slower-than-anticipated FDA Emergency Use Authorization (EUA) process for its new test created a fatal cash crunch. Pfizer then acquired the company’s assets for a mere $36.4 million. The collapse of SVB, which held deposits for numerous Chinese companies, has also raised concerns. Treasury Secretary Janet Yellen confirmed that uninsured depositors in SVB, including those with ties to the Chinese Communist Party, would be made whole by the American banking system. This has led to questions about potential conflicts of interest, especially given the belief that the COVID-19 virus originated in a lab in Wuhan, China.
    • A System Admitting Failure: In a tacit admission of the system’s shortcomings, the White House OSTP issued a new memo in August 2022, mandating that all taxpayer-funded research be made freely and immediately available by the end of 2025, effectively ending the 12-month embargo. While a welcome change, this comes as cold comfort for the companies and the public who were failed by a system that prioritized profits and secrecy over transparency and innovation during a critical time of need.

  • Just for Fun: Urgent Recommendation to the Securities & Exchange Commission (SEC): Enhanced Specificity for Use of Proceeds Disclosures

    MEMORANDUM

    FOR: The Honorable Chair, U.S. Securities and Exchange Commission

    Director, Division of Corporation Finance

    Director, Division of Enforcement

    FROM: [redacted]

    DATE: April 4, 2025

    SUBJECT: Urgent Recommendation: Enhanced Specificity for Use of Proceeds Disclosures

    1. Purpose: This memorandum recommends immediate action (rulemaking or interpretive guidance) to prohibit public companies from using vague terms like “other general corporate purposes” as the primary descriptor for the intended use of capital raised via registered direct offerings, private placements, or shelf registrations.

    2. Problem Statement & Background: Current Regulation S-K allows non-specific “general corporate purposes” disclosures. This flexibility is being exploited, contributing to significant retail investor harm. We’ve observed a troubling pattern, particularly acute during the Biden administration, where companies, especially in FDA-regulated sectors like biotech (e.g., Lucira Health, Cue Health) and other industries (e.g., Applied UV, Virgin Orbit, Rockley Photonics, Pacific Coast Oil Trust), raise substantial funds citing vague purposes shortly before collapsing into bankruptcy. This frequently results in devastating losses for individual investors (often $50,000+), while employees lose jobs.

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