Theranos offers shares to investors who promise not to sue

Founder and CEO of Theranos, Elizabeth Holmes, attends the Forbes Under 30 Summit. Photo / Getty Images

Theranos has a bizarre new plan to stop investors suing the discredited blood-testing company or its disgraced founder Elizabeth Holmes - by offering them extra shares.

The deal, reported by The Wall Street Journal citing people familiar with the matter, would see chief executive Elizabeth Holmes hand over a portion of her personal shares in the company, relinquishing majority ownership.

"This is an affirmative development for the company, providing a path forward in partnership with employees, investors and other stakeholders," Theranos director Daniel Warmenhoven told the Journal. "Elizabeth elected to contribute her own equity to protect any dilution of shares held by other parties."

Holmes raised more than half a billion dollars from investors hyping the company's non-existent "revolutionary" blood-testing technology, which she claimed could test for hundreds of diseases with a single drop of blood from the finger.

At its peak, the company was estimated to be worth US$11.8 billion (NZ$16.7 billion), with Holmes' 50 per cent stake putting her personal net worth at US$5.9 billion (NZ$8.3 billion), making her America's youngest female billionaire.

The ruse began to unravel following the publication of a bombshell expose by the Journal in October 2015, which revealed the much-hyped technology was in fact a sham, and the vast majority of the company's blood testing was conducted using competitors' products.

What followed were a string of investigations by numerous US authorities, lawsuits from disgruntled investors, the closure of labs, and the sacking of 340 staff as the company attempted to salvage something from the wreckage.

The vastly lowered valuation of the company in the wake of the scandal meant many investors' shares, purchased for $US15 (NZ$21) to $US17 (NZ$24) each, have lost most of their value. High-profile investors included Rupert Murdoch, executive chairman of News Corp - publisher of news.com.au - and US Education Secretary Betsy DeVos.

Warmenhoven told the Journal Holmes' share offer showed "a level of selflessness and grace reflecting her commitment to the company's success".