Elizabeth Holmes owes Theranos $25 million

By Christopher Weaver

Debt disclosed in investors' document offering Holmes' shares in exchange for pledge not to sue

Theranos Inc. founder Elizabeth Holmes, whose once-$5 billion stake in her blood-testing firm has shriveled amid regulatory and legal challenges, also owes her company about $25 million, people familiar with the matter said.

The disclosure of the debt was included in a deal document Theranos circulated to a select group of current investors with whom the firm seeks to trade shares from Holmes's personal stake in exchange for a promise not to sue the company or its executives, the people said.

The $25 million Holmes owes Theranos comes from an agreement between her and the company that allowed her to exercise options to buy more stock without having to pay upfront. Instead, she agreed to pay the company for the shares later, one of the people said.

"It subverts the entire premise of an option grant," said Nell Minow, vice chair of ValueEdge Advisors, a corporate governance consulting firm, who said such grants are traditionally meant to encourage executives to produce results for their shareholders. The deal between Theranos and Ms. Holmes means "any downside is someone else's risk," Minow said.