The Numbers Behind Walmart’s Acquisition of Jet.com Page
- Aug 15, 2016
The NJ Tech community is abuzz about the recent news of Walmart’s acquisition of Jet.com for approximately $3 billion. A closer look at how the proceeds will be divided reveals a deal that appears to be a win for all concerned. According to Pitchbook, Hoboken, NJ-based Jet.com did a total of 4 rounds of financing in a little over 2 years. Pitchbook further reports that the preferred shareholders of Jet.com had only a 1x liquidation preference, the preferred shares were non-participating and they had non-cumulative dividends. Where we generally see 2x and 3x liquidation preferences, cumulative dividends and participating preferred, the founders and other common shareholders—including option holders— appear to have benefited from more favorable terms.
Given the amount paid by Walmart, even with less-favorable rights and preferences, the preferred stockholders also did very well. Based on Pitchbook data, it made sense for the preferred shareholders to convert to common, which would yield more in proceeds than the liquidation preference and accumulated dividends. Since they owned approximately 65% of the company, we estimate they took about $1.9 billion of the total proceeds. The Series A round investors earned a total return over 2 years of approximately 969%, while the B1 and B2 holders earned total returns of 329% and 30%, respectively, over 9 months. This still left about $1 billion for the common shareholders and option holders, which presumably are the employees and founders.
While many have lamented that Jet.com was gobbled up before it could grow into the next Amazon, it was a great deal for everyone involved, including the NJ Tech community. Because investors made money, it shows the VC community that there are great investment opportunities in NJ. The founders and employees appear to have made money, which they will hopefully use to start and fund other tech companies in NJ. And Jet.com, now a part of Walmart, has access to a lot more capital to continue building its business, which may mean more jobs at its Hoboken location.
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Richard A. Cleaveland
Richard A. Cleaveland CPA is an Audit Partner and National Software Sector Leader, within the firm's Technology and Life Sciences Group,
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