23andMe (ME) shares crashed roughly 50% on Monday, March 24 after the personal genomics and biotech firm filed for Chapter 11 bankruptcy in the Eastern District of Missouri.
The DNA kit company that once commanded a valuation of about $6 billion will now sell its assets and use the proceeds to address its outstanding legal liabilities.
Additionally, Anne Wojcicki – the chief executive of 23andMe – has stepped down, effective immediately as part of the restructuring.
Including today’s decline, ME stock is down nearly 75% in the year to date.
What’s Next for 23andMe Stock?
Historically, there have been instances where businesses filed for bankruptcies, only to pull out of them eventually and returning to profitability.
A quintessential example would be General Motors (GM), which filed for Chapter 11 during the Great Financial Crisis but recovered from it within a year to rebuild its name as the top player in the automotive industry.
However, investors are recommended against hoping for a similar outcome in the case of 23andMe stock.
For starters, the DNA kit company doesn’t have the government support as GM had in 2008. Plus, its sales decline has nothing to do with macroeconomic factors and stems entirely from the nature of its business model.
Is It Worth Hoping for a Rebound in ME Shares?
23andMe has been mired in losses because it lacks avenues for recurring or aftermarket sales. Once consumers have their test results, they have little need to remain a customer.
ME shares have been in a freefall in recent years also because a data breach in 2023 resulted in a series of lawsuits, regulatory scrutiny, and consumer distrust.
While the biotech firm reached a settlement with nearly 7 million affected customers, its plans of a court supervised sale of assets are now resurfacing concerns of data privacy again.
All in all, investors should stay away from the biotech stock as there’s just too much drama tied to it after the bankruptcy announcement on Monday. At the time of writing, it doesn’t really feel like there’s any hope of a ME share price rebound at all.
