Robertson Stephens & Co. co-founder Robert Colman accused Theranos Inc. in a lawsuit filed Monday of making false and misleading claims about its operations and technology while soliciting money from investors.
Mr. Colman, a pioneering Silicon Valley deal maker, invested in the blood-testing company in late 2013 through venture-capital fund Lucas Venture Group, according to the lawsuit. The suit was filed in federal court in San Francisco and seeks class-action status.
The lawsuit alleges that Mr. Colman agreed to invest in Theranos after Lucas Venture Group founder Donald A. Lucas wrote in a Sept. 9, 2013, letter that Theranos invited the venture-capital firm to purchase $15 million in stock.
Mr. Lucas said it was part of a "follow-on extension" of a funding round that began in 2010, the lawsuit states.
On the same day in 2013, Theranos and Walgreens announced in a joint news release what they called "a long-term partnership to bring access to Theranos' new lab testing service through Walgreens pharmacies nationwide." Walgreens is now a unit of Walgreens Boots Alliance Inc.
The news release said Theranos had "the ability to run its tests on micro-samples" and to "minimize human error through extensive automation to produce high quality results."
Monday's suit alleges the company was misleading and cites inspection findings by federal regulators. After the inspection results, Theranos voided two years of test resultsrun on its proprietary testing platform and shut down its laboratory operations.
Theranos has said it is appealing the regulatory sanctions and cooperating with federal civil and criminal investigations, including of whether the company misled investors.
Mr. Colman, who has retired from investment banking and lives in Idaho, declined to comment through his lawyer. Theranos and Lucas Venture Group didn't immediately respond to requests for comment. Walgreens declined to comment.
The lawsuit also includes a second plaintiff, Hilary Taubman-Dye, who alleges that she bought Theranos shares on the online exchange SharesPost Inc., which acts as a broker for shares of private companies.
Ms. Taubman-Dye allegedly agreed to buy Theranos stock at a price of $19 a share in August 2015. She tried to cancel the transaction after The Wall Street Journal published in October 2015 its first article detailing problems at Theranos.
At the time, Theranos, founder Elizabeth Holmes and an unidentified third party all had a legal right of first refusal giving them a chance to buy any shares an investor chose to sell in a secondary transaction, the suit alleges.
According to the suit, Ms. Taubman-Dye was told by SharesPost that Theranos, Ms. Holmes and the third party had declined to purchase the shares. Ms. Taubman-Dye's purchase was completed Dec. 7, 2015, the suit claims. She declined to comment through her lawyer.
On its website, SharesPost warns investors that private companies are high-risk investments and that users "must be prepared to withstand a total loss."
Reed Kathrein, a partner at law firm Hagens Berman Sobol Shapiro LLP in San Francisco who represents Ms. Taubman-Dye and Mr. Colman, said there might be several hundred plaintiffs who could be represented in a potential class-action suit against Theranos.
Theranos allowed just a handful of investorsto buy shares directly from the company when it issued stock several times between 2006 and 2015, according to people familiar with the transactions. An unknown number of shares could have changed hands in secondary deals.
Mr. Kathrein said Mr. Colman and Ms. Taubman-Dye cumulatively invested "hundreds of thousands of dollars" in Theranos, based in Palo Alto, Calif.
Robertson Stephens, a boutique investment bank that specialized in technology deals, was shut down in 2002 by owner FleetBoston Financial, now part of Bank of America Corp. Robertson Stephens forged its reputation underwriting billions of dollars in tech deals that helped fuel the dot-com boom of the late 1990s.
A separate money-management firm in San Francisco now operates under the name Robertson Stephens LLC.
Monday's lawsuit is the third filed by Theranos investors since Oct. 10 and the first suit to seek class-action status. In November, Walgreens sued Theranos in afederal court in Delaware, seeking $140 million in damages.
That is equal to the amount Walgreens invested in its partnership with Theranos, including convertible-debt instruments, according to people familiar with the matter. Theranos has said that the earlier lawsuits are without merit and that it would fight them.
Write to Christopher Weaver at email@example.com
(END) Dow Jones Newswires
November 28, 2016 15:55 ET (20:55 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.