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Confirmed: Walmart buys Jet.com for $3B in cash

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Re: Confirmed: Walmart buys Jet.com for $3B in cash

#31

Post by harryh »

rdlecler1 wrote: post #29

I get why Walmart would buy them, but it seems to me they could have waited 6-12 months and bought the company for $300m. There's just no way they were showing growth. The only thing that makes sense is that Jet would have been damaged goods in 12 months and this was the only option for Walmart to build a millennial friendly competitor to Amazon.

They're not just buying a pile of code. They're also buying an energized and engaged team that they hope will be able to modernize Walmart's ecommerce systems. They wouldn't have gotten that if they had purchased a broken failure of a company somewhere down the road.

Re: Confirmed: Walmart buys Jet.com for $3B in cash

#32

Post by dave_sullivan »

a_small_island wrote: post #8

What's the likely scenarios for an employee whose been there for 2 years, an employee whose been there for 1 year, and an employee whose been there for 6 months? If we assume 1 year cliff on options.

Very much napkin math, take with salt:

$3b purchase price + $300m in Walmart options

The company raised $500-800m at at least a $1b valuation, no idea on later round(s), seem less reported, maybe a downish round?

Investor liquidation preference guarantees investors get their money back 1x or 2x or 3x or whatever (assuming they don't lose all of it).

So if they raised at a $1b valuation, sell for $3b, a 2x preference means there's $1b in profit left after paying investors. Again, assuming you know how the rounds were structured, which I don't. And not counting taxes. Or other contract terms that kick in on certain conditions.

So best case scenario, there's $1b for employees + $300m in options. Unless liquidation pref is 2.5x which means $500m cash left + $300m in Walmart options. If it's not vested, they can make a problem out of it (or they can accelerate vesting, but it's up to Walmart mostly). Most employees will probably need to do their time at Walmart, so to speak, and not get fired there.

Early employee maybe got 1%? That would have been diluted of course. But $10m is probably best case scenario (after taxes, you can afford a pretty nice place in the Bay Area and have some left over) If you got more like .1% of the company (still kind of a lot, really, and the founder sold their last co for $500m so better odds?), you just made a million bucks, which will be about 700k after taxes. And you've got a job at Walmart.

I would be surprised if the actual outcomes for employees were higher; unsurprised if lower.

Re: Confirmed: Walmart buys Jet.com for $3B in cash

#33

Post by tyre »

a_small_island wrote: post #8

What's the likely scenarios for an employee whose been there for 2 years, an employee whose been there for 1 year, and an employee whose been there for 6 months? If we assume 1 year cliff on options.

Great question. The answer is the same for all of them: roughly 0.

Jet's last valuation was $1.6bn and it was, and continues to, burn cash like crazy. Investors aren't dumb, they see that.

So they add a terms to their investment whereby they guarantee a return on their investment. For a company that needs hundreds of millions of dollars and is trying to beat Amazon? Let's say 3x.

That means that if I put in $100m dollars at a $1.6b valuation, then you sell at a $4.8bn or above, then everything is fine because I got my 3x. If you sell for less, as they did, then I get my $300m first, before anyone down the line. That's called liquidation preference.

Jet was burning capital so they likely had to make a lot of concessions in fundraising. Given that their estimated total funding is around $800m, there isn't much else to go around.

You'll notice that some employees and the founders got around $300m worth of Walmart stock. Why would they need that if the company just sold for $3bn? Because the sale likely netted them next to nothing.

Re: Confirmed: Walmart buys Jet.com for $3B in cash

#34

Post by chatmasta »

harryh wrote: post #31
rdlecler1 wrote: post #29

I get why Walmart would buy them, but it seems to me they could have waited 6-12 months and bought the company for $300m. There's just no way they were showing growth. The only thing that makes sense is that Jet would have been damaged goods in 12 months and this was the only option for Walmart to build a millennial friendly competitor to Amazon.

They're not just buying a pile of code. They're also buying an energized and engaged team that they hope will be able to modernize Walmart's ecommerce systems. They wouldn't have gotten that if they had purchased a broken failure of a company somewhere down the road.

Doesn't Walmart already have pretty decent tech? I recall seeing some impressive scalability blog posts from the team st "Walmart labs."

Re: Confirmed: Walmart buys Jet.com for $3B in cash

#35

Post by harryh »

chatmasta wrote: post #34
harryh wrote: post #31

Earlier quoted context omitted.

They're not just buying a pile of code. They're also buying an energized and engaged team that they hope will be able to modernize Walmart's ecommerce systems. They wouldn't have gotten that if they had purchased a broken failure of a company somewhere down the road.

Doesn't Walmart already have pretty decent tech? I recall seeing some impressive scalability blog posts from the team st "Walmart labs."

Not compared to Amazon.

Re: Confirmed: Walmart buys Jet.com for $3B in cash

#36

Post by sremani »

WhitneyLand wrote: post #12

Is anyone here using Jet on a regular basis? I tried it once a few months back and dismissed it as nothing innovative enough to be a sustainable Amazon competitor. I must have been very wrong. I don't see how Jet justifies 3B from Walmart. I will credit them on one point - They do seem have great employee sat that is a result of investing lots of time and energy to create a healthy environment.

I use them pretty regularly, since I discontinued my Amazon Prime membership. Amazon without Prime is a shipping fee quagmire. Jet is terrible for ordering books, but other than that they are pretty prompt on delivering stuff within 2 days. You get discount for using debit card (1.5%) and using a larger cart drops prices(which stops after you added a bunch of items).

Re: Confirmed: Walmart buys Jet.com for $3B in cash

#37

Post by argonaut »

chatmasta wrote: post #34
harryh wrote: post #31

Earlier quoted context omitted.

They're not just buying a pile of code. They're also buying an energized and engaged team that they hope will be able to modernize Walmart's ecommerce systems. They wouldn't have gotten that if they had purchased a broken failure of a company somewhere down the road.

Doesn't Walmart already have pretty decent tech? I recall seeing some impressive scalability blog posts from the team st "Walmart labs."

Funnily enough, Walmart Labs was the result of an acquisition.

Re: Confirmed: Walmart buys Jet.com for $3B in cash

#38

Post by [deleted] »

tyre wrote: post #33
a_small_island wrote: post #8

What's the likely scenarios for an employee whose been there for 2 years, an employee whose been there for 1 year, and an employee whose been there for 6 months? If we assume 1 year cliff on options.

Great question. The answer is the same for all of them: roughly 0. Jet's last valuation was $1.6bn and it was, and continues to, burn cash like crazy. Investors aren't dumb, they see that. So they add a terms to their investment whereby they guarantee a return on their investment. For a company that needs hundreds of millions of dollars and is trying to beat Amazon? Let's say 3x. That means that if I put in $100m dol…

[deleted]

Re: Confirmed: Walmart buys Jet.com for $3B in cash

#39

Post by tedmiston »

I really hope Walmart doesn't scrap the Jet Anywhere cash back program [0].

It seems not well known and somewhat controversial, but offers generous rates higher than everywhere else. For example, 4.8% from Expedia, 5.6% from Orbitz. Unlike every other cash back program they do not cap the amount for flights.

JetCash is effectively real cash because many items are available cheaper than even from Walmart, Amazon, or Costco. Presumably Jet was taking a loss on those transactions in the short term. It really has been my favorite cash back program ever.

[0]: https://jet.com/anywhere

Re: Confirmed: Walmart buys Jet.com for $3B in cash

#40

Post by Klinky »

asmithmd1 wrote: post #11
tommynicholas wrote: post #6

Earlier quoted context omitted.

There are always retention bonuses for the founders. What scenario would the options not be worth anything? It's a cash acquisition that is 2x larger than the post of their last round of funding which was fairly recent.

The common stock might be worthless if the last money in had a 2x or greater liquidation preference. https://en.wikipedia.org/wiki/Liquidation_preference

These kinds of exceptions/clauses/preferences are exactly why people need to think twice before sacrificing their life over stock options. The process is not transparent enough, and even doing some due diligence to try to ensure you're not getting shafted often results in you still getting the shaft. Unless you're dropping major coin as an investor who can dictate terms, all stock options should come with a huge bucket of complimentary salt.

It is pretty gross when founders/management try to incentivize burnout with false promises, while banking a nice payday at the end of the rainbow for themselves.

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