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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

#51

Post by dave_sullivan »

agentgt wrote: post #46
dave_sullivan wrote: post #32

Earlier quoted context omitted.

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…

> Investor liquidation preference guarantees investors get their money back 1x or 2x or 3x or whatever (assuming they don't lose all of it). I haven't looked into the walmart/jet deal but one hangup on this assumption is very often the entity purchasing was the entity that invested initially in the first place (directly or indirectly). That is they are just moving money around and buying something they already own (e…

Hmmm, I don't think they'd forgive liquidation preference in that scenario. I can think of a few specifically that I won't name where that's exactly what happened. The big co co-invests with other VCs, who put together the terms. The big co (or rich celebrity entrepreneur) wants the capital gain; it's not just moving money around.

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

#52

Post by ArtDev »

I hope they don't scrap jet.com (but I suppose they will). My wife and I just discovered it rather recently :(

Am I the only person who would rather pay more than have to order anything from walmart.com?

Aside from serious ethical issues, my issue with Walmart is that manufacturers produce lower-quality brand-name items just for Walmart. Its hard to know what you are actually purchasing.

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

#54

Post by HenryTheHorse »

harryh wrote: post #43
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.

The short answer is that it's very hard to know as Jet was a fairly unusual company. They raised (and spent) a tremendous amount of capital and it's not generally known what terms those raises were done on. If the terms were favorable (standard preferred stock) the employees likely made several billion dollars (in aggregate) on the deal. If the terms were not favorable the employees could have made relatively little.…

Spot on analysis. WMT is really doing a talent acquisition here.

Jet.com differentiated itself from AMZN through concepts like "happier work culture", which, given WMT's reputation, is rich in irony.

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

#55

Post by elbasti »

KenCochrane wrote: post #49

Jet.com ran a contest where they gave 100,000 shares as the top prize for the most signup referrals. This Guy is probably one happy guy right now. He spent $18k and the value of those stocks are probably worth in the millions. http://www.businessinsider.com/jet-insiders-referral-program...

Pretty cool. While this is almost certainly in violation of general solicitation SEC regulations, I doubt there would be any action taken by the regulator.

The surprising part is that Jet.com's legal department let this fly.

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

#56

Post by runako »

mikeyjkk wrote: post #3

In cash? Really?

Wal-Mart is currently in the middle of a stock buy-back, which implies that management believes their shares are undervalued. From that perspective, using undervalued shares to purchase an asset would mean using too many shares to do the purchase, resulting in wasted money.

The inverse of this is why companies with "overvalued" stock fund acquisitions with stock.

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

#58

Post by ryandrake »

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…

If no employees get anything, why wouldn't they organize and threaten to quit together (leaving Walmart buying the name, a founder or two and some technology with nobody to run it) to try to stop the deal? Isn't the whole idea of accepting 1/2 salary at a start-up because of your glorious equity? Whenever I hear about these "deals" where employees end up with nothing or close to nothing, I wonder what they are thinking. Why accept that?

EDIT: I suppose if the alternative is "run out of money next month and everyone's fired anyway", then worthless equity and a possible job maintaining that code at Walmart doesn't sound so bad.

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

#59

Post by Systemic33 »

doppp wrote: post #50
ffggvv wrote: post #5

It's funny how everyone was saying that Walmart would never pay $3B https://news.ycombinator.com/item?id=12218654

It ain't HN without some good ol' cynicism.

It's what makes HN so great.

Even the original Dropbox "Show HN" pitch was agressively cynical about it; "I can do the same thing with a linux box and some scripts...", etc.

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

#60

Post by djrogers »

dave_sullivan wrote: post #32
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…

> $10m is probably best case scenario (after taxes, you can afford a pretty nice place in the Bay Area and have some left over)

That's an extreme overstatement - a 'pretty nice place' in the bay area would cost in the $1M range, maybe $2M if you have a pretty jaded view of 'pretty nice'.

> you just made a million bucks, which will be about 700k after taxes.

More like 500K - 39.6% federal and up to 12% CA state tax.

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