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Confirmed: Walmart buys Jet.com for $3B in cash
- wheaties 10y agoI have to wonder if the employee stock options were worth anything? Most telling is that Walmart decided to throw ~$300M at the founders "and others" to retain them. Does that mean, in this case, that the founding team is the only one who walks away with a payday? And to be clear, this isn't a cynical musing. I'm genuinely curious to see how this worked out for them.
- tommynicholas 10y agoThere 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.
- asmithmd1 10y agoThe common stock might be worthless if the last money in had a 2x or greater liquidation preference. https://en.wikipedia.org/wiki/Liquidation_preference https://en.wikipedia.org/wiki/Liquidation_preference
- tommynicholas 10y agoIt would have to be much more than 2x - 2x would still have no impact because the acquisition was 2x the price of the last round.
- asmithmd1 10y agoYou are right. I took a quick look at the cap table on CrunchBase and there is lots of smart money in it. It is definitely a win for the investors but how much of a win for common share holders is up to how hard the CEO fights for them.
- tommynicholas 10y agoSo true!
- morgante 10y agoI think everyone will be pretty happy. This isn't Marc's first company (he sold Quidsi to Amazon for $500M) and everyone I know was happy with that deal.
- Klinky 10y agoThese 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.
- JonFish85 10y agoSome scenarios (in no real particular order): - A Zynga-like order: give back unvested stock or you're fired - There were "hidden" bank loans / lines of credit that need to be paid back first. These may not be known to employees, but generally they are the first in line to be paid back. - If the cash acquisition is assuming they hit some earn-out targets, there's a very, very good chance that they won't get 100% of the money, and in fact could get a lot less. - If the investors had some sort of very tough terms where they get a 1-2x return before participating in the common stock, that could make this worth very little to employees.
- tommynicholas 10y ago#1 is the only one I can imagine (that was such a horrible situation at Zynga, I had family get hit), and given the founder, extremely unlikely. I understand why everyone wants a reason to be skeptical of this acquisition, but all signs point to a home run for everyone involved.
- tedmiston 10y agoIt's important to consider that sometimes these acquiring company stock options come with additional vesting attached to them. It can be time based + milestone based.
- mikeyjkk 10y agoIn cash? Really?
- dubcanada 10y agoWalmart has money, am I missing something or is there a reason they would not want cash?
- mattmaroon 10y agoIn startupland, one typically buys another with stock because they don't have much cash and their stock is arguably overvalued. In real business-land, cash is pretty common.
- bluedino 10y agoWalmart doesn't have extremely over valued stock like another dot-com would that would pay with stock
- deleted 10y ago[deleted]
- thinkMOAR 10y agoYou know it won't be unlabelled suitcases filled with cash right?
- stonemetal 10y agoOf course not, it will be a very large novelty check. /s But why cash or at least 100% cash? Just seems weird to me that at least some of it wasn't in stock. Is it because Jet was still private, so any stock in the deal would have been immediately liquidated by the VCs?
- jonknee 10y ago> But why cash or at least 100% cash? Just seems weird to me that at least some of it wasn't in stock. Is it because Jet was still private, so any stock in the deal would have been immediately liquidated by the VCs? Because Wal Mart has lots of cash and that's what Jet.com shareholders wanted instead of WMT shares? Lots of deals by established companies are in cash and in the current environment where you're not getting any meaningful interest on cash that will continue to be a common thing.
- ffggvv 10y agoIt's funny how everyone was saying that Walmart would never pay $3B https://news.ycombinator.com/item?id=12218654 https://news.ycombinator.com/item?id=12218654
- doppp 10y agoIt ain't HN without some good ol' cynicism.
- Systemic33 10y agoIt'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.
- elliott34 10y agoWould love to see this post if you have it handy.
- scoppini 10y agohttps://news.ycombinator.com/item?id=9224 https://news.ycombinator.com/item?id=9224
- Anasufovic 10y ago#3 is still valid
- deleted 10y ago[deleted]
- toxican 10y agoI'll never understand remarks like that. The people who can put together something with similar functionality to Dropbox are by far in the minority. It's like having access to tons of scrap and be able to weld and dismissing metal bed frames because "I can do the same thing with some welding and scraps". Also the claim that it would eliminate my need for a USB drive was 100% on point.
- a_small_island 10y agoWhat'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.
- theflork 10y agovery interested in the answer to this as well.
- djb_hackernews 10y agoThere was an article where the cofounder mentions everyone gets the same lump of stock depending on pay grade. He also mentions it helps incentivize people to work nights and weekends so based on his unrealistic expectations of work life balance and giving out stock based on "lumps" I can come to my own conclusions.
- dave_sullivan 10y agoVery 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.
- WhitneyLand 10y agoIs 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.
- dclowd9901 10y agoI see this as Wal-Mart buying their place into the online market. It's hard for a company like that to be able to spin up an entire division, and do it right. A cynical person might also believe Jet created itself to be sold off in this very way, too.
- arenaninja 10y agoTo be fair, I installed the Walmart mobile app as well as Jet over the weekend. The Walmart experience is miles ahead. Pricing was also better, and Walmart has better pricing than Amazon on a lot of things lately. I'm not sure that they're 'buying' their place, because it seems to me they're ahead of the game on anything but name
- tedmiston 10y agoWalmart's e-commerce growth has been declining every quarter, except Q4 2014 where it jumped +1%, since the beginning of 2014. http://fortune.com/2016/05/20/the-silver-lining-in-walmarts-slowing-e-commerce-growth/ http://fortune.com/2016/05/20/the-silver-lining-in-walmarts-...
- voidlogic 10y agoWalmart has been rapidly growing their eCommerce operation for several years, the only difference in the past this has been done via multiple smaller acquisitions per year, rather than by huge ones.
- publicfig 10y ago
- SmellTheGlove 10y agoGood for them. I talked to a couple of folks there regarding potential roles that they'd had in the HN hiring thread. We never went anywhere on that front, but everyone that I interacted with was a total class act. I hope this works out well for the existing employees.
- blackaspen 10y agoBased on how Walmart's eCommerce has failed to grow I think this is a waste of $3B. Hopefully the Jet employees get a nice payday out of it.
- mabramo 10y agoThey came to my university to recruit last spring. I bet whoever got that job feels real good right now.
- plandis 10y agoThis is interesting. I always assumed that Jet was operating at a loss for a significant amount of their stock due to shipping costs. I wonder if Walmart's more physical presence can help with this?
- rdlecler1 10y agoI 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.
- harryh 10y agoThey'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.
- chatmasta 10y agoDoesn't Walmart already have pretty decent tech? I recall seeing some impressive scalability blog posts from the team st "Walmart labs."
- tedmiston 10y agoI 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 https://jet.com/anywhere
- Analemma_ 10y agoIf they were taking a loss on those items, isn't it practically a guarantee that they were doing that with VC money in order to grow their customer base either to build a sustainable business later or make them a more attractive acquisition target? Either way, I wouldn't expect it to continue. Not even after a normal acquisition, and certainly not from WalMart. WalMart (in)famously pinches every penny; they don't sustain money-losers.
- tedmiston 10y agoIt's hard to tell because their pricing strategy is so complicated with the dynamic discounts based on quantity, what else is in your cart, paying by debit card vs credit card, etc. The items that were cheaper than Costco weren't way cheaper, maybe 5–10% less, so I considered that they may have some kind of higher level membership that I don't know about.
- kevindong 10y agoFor a more comprehensive listing of cashback programs, try using Cashbackholic [0]. You type in the store you're buying from and it lists almost every cashback program that offers additional cashback on that store. [0]: http://www.cashbackholic.com/ http://www.cashbackholic.com/
- nommm-nommm 10y agoCashbackholic is not accurate from what I've seen, guess it's out of date. Cashback Monitor is accurate. http://www.cashbackmonitor.com http://www.cashbackmonitor.com
- Fej 10y agoI knew this was their plan as soon as they pivoted away from the "club" business model. Damn shame, I was hoping to maybe apply there at some point.
- KenCochrane 10y agoJet.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-winner-2015-2 http://www.businessinsider.com/jet-insiders-referral-program...
- elbasti 10y agoPretty 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.
- vessenes 10y agoWhy would this violate? They are giving a reward, no value implied or stated.
- elbasti 10y agoIn general, the unregistered "general solicitation" for the purchase of securities is prohibited. You can't go on TV and ask people to buy your stock in exchange for money unless you have registered to do so--an IPO or subsequent S1. Stock is certainly a security. Stock options are just call options of a security, and also a security. Obviously there is some (future, conditional) value implied since it's a reward. It doesn't really matter whether you are trading stock for dollars, or work, or fb likes, or whatever--it's still a general solicitation because they are being traded for something. Caveat: I'm not a lawyer but I have been involved in startups in the space for many years.
- nv-vn 10y agoWell he was just referring people to sign up for the website. The money was money he spent advertising the website(?), so the money only went to getting new members. The stocks were given as the reward for the most sign ups, not in exchange for money.
- ArtDev 10y agoI 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.
- jackmott 10y agoJet.com is a big user of the F# language. Will be interesting if they get Walmart on board too.
- mason55 10y agoWalmart.com is a pretty big user of Scalia already
- kalari 10y agoIt makes sense they want to buy Jet, since what they are currently using is dead.
- ihaveajob 10y agoApparently the replacement has been proposed already, but the powers that be keep shutting that down, too.
- hga 10y agoClojure as well, e.g.: http://blog.cognitect.com/blog/2015/6/30/walmart-runs-clojure-at-scale http://blog.cognitect.com/blog/2015/6/30/walmart-runs-clojur... They're pretty language agnostic from what I've heard, not always in a good way.
- allengeorge 10y agoCould you expand on this a bit? Does that mean that they don't have a common set of internal libraries?
- ajamesm 10y agoThat's a shame, I heard Scalia's been dead for a while.
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- nine_k 10y agoOn one hand, being bought for $3B. On the other hand, joining Walmart. (Sorry, could not help but being a bit redditish about it.)
- blahi 10y agoWhat's bad about Walmart?
- iRobbery 10y agothey won't make jet.com people stock the shelves at walmart for minimu... i mean $3 billion :)
- johnwheeler 10y agoWalmart has a killer IT department. They're known to run it like a startup.
- rogerdpack 10y agoI figured out what is going on here. Walmart thinks to themselves "we want to be like amazon, we want to be huge online" and then jet comes along and is something of an almost competitor to amazon, so corporate thinks "oh we should snap this up" but...my gut reaction here is this is going to be a terrible deal for walmart, what are they going to do, keep dumping $500M/yr for it at a loss or what? Pretty desperate, but whatever.. :)
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- swalsh 10y agoIf you're a cynical person that is an easy thought... but something tells me a 3B acquisition of a company that is losing money in so many places isn't a decision taken lightly. A public company like Walmart, there's some people doing some math here.
- sbierwagen 10y agoA public company like Walmart, there's some people doing some math here. http://www.zdnet.com/article/yahoo-reports-another-big-loss-and-tumblr-write-down/ http://www.zdnet.com/article/yahoo-reports-another-big-loss-... Yahoo also reported that it's writing down $482 million in charges related to the declining value of Tumblr, the social-blogging service that Yahoo acquired for $1.1 billion in 2013. http://www.theverge.com/2015/7/8/8910999/microsoft-job-cuts-2015-nokia-write-off http://www.theverge.com/2015/7/8/8910999/microsoft-job-cuts-... and the company is writing off $7.6 billion related to its acquisition of the Nokia phone business. That's more than the $7.2 billion Microsoft paid for Nokia's phone business last year. Public companies "do some math", but that doesn't mean their math is always right. Acquisitions are bets, and bets don't always pay off.
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- coryfklein 10y ago
- cosmoharrigan 10y agoAre there any sources indicating what percentage of sales or units are from third-party retailers?
- dpeterson 10y agoWalmart easily owes over 3 billion in taxes every year. There is a tiny almost non existent chance they will get a return as profit. However there is a 99.999% chance they get jet.com for free when they write it off as a complete loss in 2 years. If nothing else they get a valuable 3 letter domain name for nothing.
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- bjacokes 10y agoYou're misunderstanding how taxes are calculated. If they could deduct the writeoff, they'd make back their marginal tax rate times the purchase price, so they'd still lose around $2B. (Similarly, when people deduct their mortgage interest, they don't get the mortgage "for free".)
- perseusprime11 10y agoI doubt this will change the trajectory of Walmart. Bezos has the upper hand.
- throw42 10y agoGuess who is on Walmart's board, and likely voted when the acquisition discussion was happening. Our very own Marissa Mayer. We also have Kevin Systrom on teh WM board.
- ismdubey 10y agoCompare this with Dollar Shave Club acquisition for 1B. Either Jet is overvalued or DSC is undervalued !!!!
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- dmode 10y agoThis seems like a very average deal for investors. They would have similar returns if they invested that money in Amazon or Facebook stock
- yomly 10y agoCall me a sceptic but a hail-mary acquisition of this kind is not going to save Walmart. Amazon is built through and through as a tech company. The people running it all have tech backgrounds so they're all able to get behind the Bezos vision of automation and scale trumping all. To give you an idea of how savvy the management of Amazon are, I heard rumours that Diego Piacentini (Bezos' lieutenant managing the retail business) was known to roll out his own SQL queries. My own head of the team, who was a more conventional "retail guy", barely knew how to use excel and had chiefly gotten to where he was by politics and tenureship, despite being younger than Diego. Whether it is true or not, it gives an idea of the mindset and skillset valued at the top of Amazon. Now I'm almost certainly biased given that I've worked for Amazon and not for Walmart, but I'd be willing to bet that Walmart has more of the latter "old school" types than CS folks looking to solve new fields. And to me, that says that the odds are tipped against this integration being successful as catching up with a tech company would require an overhaul of Walmarts entire infrastructure and culture. Not to mention that Walmart are at the mercy of their shareholders, whilst Bezos is still majority shareholder.
- JHutson 10y agoSo what does this all mean for people currently purchasing shares of Jet? It's still a penny stock...but will this change later in the year when the merger is complete or perhaps in 2020 when Jet claims it will be profitable? Based on the valuations of the company's worth, where do a analysts estimate Jet stock to go? Thanks!