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Confirmed: Walmart buys for $3B in cash (
429 points by brandonlipman on Aug 8, 2016 | hide | past | web | favorite | 254 comments 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.

The last $350 million round @ a $1.6 billion valuation priced common shares @ $5/share implying ~ 320 million common shares (napkin math ignoring a bunch of other variables). 100,000 options would represent .03125% of the company. Assuming the strike price was at least $500 million (maybe more), that's a gain of $781,250, or ~ 43x on his initial $18k investment. A great angel investment for sure, but perhaps not millions. If that's truly the same number of options that some of the earliest employees were granted (as mentioned in the article), then I feel bad for those employees as they probably deserved a bit more.

Why are you assuming the strike price is $500MM (not to mention this is the price of the company, not the strike of the option)? The strike price is what the stock is worth in terms of GAAP accounting, not what a VC is willing to buy X% of the company for (if I offer you $1 for x% of your company, is the company now necessarily worth $1/x?)

Companies of that size will typically have biannual 409(a) valuations done by professional valuation firms in order to establish the ''fair market value'' of common stock. This value becomes the strike price for employee options. Usually this is done for tax purposes, so that the IRS doesn't come in later and accuse you of under-pricing. In my experience common stock is valued around a 30-70% discount to the latest preferred stock (but can fluctuate on a case by case basis), with greater discounts seen in small companies (''we could go bankrupt at any time'') and lesser discounts seen in more mature companies (''we're going to IPO for billions we're just not sure if there will be a 2 or a 10 in front''). In the case of Jet, I'm just guessing at the fair market value at the time the award was made based on the published investment round valuations.

<< (if I offer you $1 for x% of your company, is the company now necessarily worth $1/x?) >>

Great point. Secondary market transactions have to be included in the 409(a) valuation analysis and this caused a lot of problems for companies like Facebook who had active secondary markets (with rising prices) even as they tried to keep option strike prices low to recruit new employees. I am not an expert but I think the short answer is that if you buy $1 worth of stock then it can be ignored as a non-material transaction but if you buy $1 million then it has to be scrutinized along with all similar transactions which would be collectively factored into the formula for ''fair market value''.

Another minor point - when calculating return in this case, you have to adjust for the fact that this guy ''invested'' $18k but wasn't able to count that money towards his basis in the stock or realize long-term capital gains treatment the way a typical angel investor would have. This means he will likely pay an extra 20% in Federal taxes, which lowers his LTCG-adjusted psuedo-angel-investment return a bit further.

I wonder what the specifics are. It says "stock options" in the linked article and "He'll be able to vest or exercise his stock options if Jet ever goes public or sells to another company."

I always hear stories about early stage employees getting the short end of the stick during acquisitions. Could there be a chance that this acquisition ends up not in his favor and he is out $18k?

It is possible.

There was a subsequent 350m round in November so that means dilution for everyone.

So that, coupled with liquidity preferences for the venture investors, could mean he didn't get much.

He likely does have cash as well as shares in Walmart from this deal, but I doubt he made "millions" from this, and it is entirely possible he is close to breakeven (just as possible that he has a six figure amount). But we don't have any transparency from this.

This is the kind of gambling the society puts you on a pedestal for, so don't worry too much about the bet. Its a "good" one.

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's legal department let this fly.

It was probably nonqual or ISO employee grant. Those get tied all the time to performance.

Why would this violate? They are giving a reward, no value implied or stated.

In 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.

Well 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.

The point is that the stock was exchanged for something (referrals, marketing, etc), and that the contest was announced (ie, general solicitation). That no cash traded hands doesn't matter.

There is precedent of an almost identical enforcement action by the SEC, but my google fu is failing me.

Can a startup publicly recruit with the promise of stock as compensation?

Would be's issue, not the guy.

That is correct.

You can sell securities to non-accredited investors if you have audited financials (basically conforming to public IPO requirements) and the number of people you do so is greatly limited. This stuff is more complicated than I'm making it seem, but small quantities, again with audited financials (minimum audit costs ~$10K) and this can be possible/legal. Definitely consult securities lawyers if you're considering doing anything like this.

I think the traded for something angle is key here. And, of course, SEC is generally happy when consumers benefit, and fines when they don't.

But, I would think a line of defense would be that participants knew they wouldn't necessarily get anything for participating and presumably agreed to that in contest terms. At that point, the contest is just a giveaway -- and you can, in fact, give away stock.

OMG. What a smart move and an amazing investment. The guy probably saw 1,000 x return.

I'm surprised that his wife didn't divorce him for taking so much risk over this much money. Especially when they have 2 kids.

Um... Why do you believe she wasn't onboard with it? Or that $18k was an amount of money that represents an unacceptable risk for them?

I didn't see anything in the article stating that she disagreed with the decision. Or that that amount of money will actually be missed. 18k is peanuts to many people.

Business savvy people who have a LOT of money often have a "risky investment" fund. Hell, I have a very small risky investment fund myself and I only have a moderate amount of money.

I 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" 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.. :)

Walmart has something needs: one of the world's most advanced product delivery systems. Every Wal-Mart store is a distribution center waiting to happen. They are enormous and they are everywhere. has something Wal-Mart can use to rocket its online presence forward: advanced online infrastructure, patents, a wealth of technology experts, and users.

Together, Wal-Mart can beat Amazon at its own game by doing what Amazon is already doing (building more, smaller DCs everywhere) using what they already have (massive retail locations everywhere).

Jet also has something else that Walmart doesn't have: a better reputation. It doesn't hurt that Jet's founder also used to work for Amazon as well and he has a track record with founding and running Quidsi (, etc...)

It does have a reputation (for me, anyway) of possibly being cheaper. And tons of reviews online of people having poor experiences buying from it. That's the rep. it has for me so far :)

It does have a cooler looking website than walmart, and possibly even amazon. FWIW.

That's actually what I was discussing. Walmart does have the reputation for being cheap; too cheap at the expense of everything else (parking lot safety is just one example out of many). Market research has shown time and time again that they just can't win certain high income demographics (even after making major changes), which is just another reason that Costco, Target, and Amazon thrive and why I feel that this was a good buy for Walmart.

Cheap with a poor customer experience? They'll fit right in at Walmart.

I hope it works out for them. Amazon's age it's showing, their site it's clunky and unresponsive at times. Sellers misrepresent their wares all the time. They're outright banning some products which, for a store, it's a very opinionated move if you ask me. And don't give me the "the Apple Store doesn't carry the Fire" crap, Amazon bills itself as the "everything store". It works sure and customer service it's still miles ahead the competition (this is expensive and something that it's always overlooked by the competition) but they're neglecting the storefront by trying to be "everything".

Amazon closes customer accounts left right and center too, good luck getting thru to anyone human then despite being a decade long customer with thousands of digital purchases going poof.

Can you give me any pointers on where I can find out more about this?

(Also curious about the banned product lines if anyone can summarize/link to what's going on there.)

Sample product: you can no longer get neodymium magnets from Amazon Shopping. (They were in my Wish List, and then, poof, "This product is no longer available." More searching within the site returned nothing.)

Okay, granted, but that's not exactly what I'd call egregious. They're, um, capable of causing injury, and the kind of thing I would probably want to ensure was only sent to recipients who had a i-know-what-i'm-doing form on file with my legal dept. Not the kind of thing I expect to be available for free 2-day shipping or whatnot.

You can Google "Amazon phone number" to speak to someone human...

I did, they want me to fax credit card details to their fax number (who the hell uses fax in this day and age?) which I done and no reply

I doubt anyone monitors it, everytime I ring them they bounce me from idiot to idiot

I now need access to some invoices for purchases I made last year for accountant but cant login, and of course all my digital purchases are gone, the 2 kindles are useless.

Sounds like parts of this saga are missing. Amazon doesn't just dump customers, they are happy to take everyone's money.

I kinda doubt is more sophisticated than They just wanted a more youthful brand.

Just about anyone who cares is envious of Walmart's logistics systems. They're seriously life-savers in disaster management scenarios. has no:

- reviews of products

- no customer q&a section

- no 3rd party seller ratings

These are rather basic features in an ecommerce site. So no, I don't think the guys from are experts at all.

Worse than having no content is publicly showing an empty user-generated content section. Marketing-wise it also seems like a dumb idea to try to beat on longtail.

Perhaps they intentionally don't have those. I can see them being as much liabilities to a marketplace as a benefit - with significant overhead.

Wal-Mart's delivery system is tuned to service a few thousand stores plus whatever scraps takes in. It remains to be seen if they can use Jet to their advantage or destroy it by borgifying their management with Wal-Mart graybeards.

I am a little skeptical on Jet side, experts, patents etc. I think Walmart probably has better experts, but like someone said, this is mostly lead by corporate and I expect this to turn out to be terrible decision. But what do I know :)

WalMart has experts, but they are already busy current problems. To get into online needs experts who spend their time on the problem - but WalMart cannot afford to let their current experts leave their current jobs or the company would go under.

That isn't to say WalMart can't (or shouldn't) transfer some of their experts to Jet, and some Jet experts elsewhere. Just that they cannot afford to lose all their experts in the core business to the online dream.

I too expect this to turn out to be a terrible decision, but I've been proven wrong on my expectations before. Reasons like the above is generally why. is a disaster of a company fundamentally.

However, it does make sense for a company like Walmart. I don't know about 3B, but Jet is a drastically cooler brand for them in their ecommerce battle esp. among millenials.

Jet was previously fulfilling many orders from Walmart and now they can build a seamless integration to deliver competitively priced items quickly from the stores.

> I don't know about 3B, but Jet is a drastically cooler brand for them in their ecommerce battle esp. among millenials.

Every time I see a comment like this, it really makes me wonder who these mythical millenials are. I work in a company with 11 millenials out of 16 employees and NONE of them have even heard about Jet, let alone bought from it. Now that Jet was acquired and will be quietly folded into Walmart, it's more than likely they never will.

They use Amazon almost exclusively for all of their shopping needs.

Not sure where you got the notion that 'Jet is a drastically cooler brand'. It seems false both from anecdata I have and from the design of their website, which looks like a cheap knockoff of Amazon.

I meant Jet is a much cooler brand than Walmart.

Sure - many millenials haven't heard of it yet, but that's beside the point. Everyone has heard of Walmart but they struggle online. In your anecdote, 30% have brand recall which isn't as bad as you make it seem.

The problem with Jet as it currently stands is that it isn't very compelling for word of mouth. I've used it and had a decent experience but never told anyone about it.

Anyway, Walmart can put more muscle behind it, likely deliver a better service and push a cooler brand than their own. At the same time - they can utilize their store inventory and distribution/shipping and potentially drive consumers to pick up in store same day (and drive more in-store revenue).

You make an assumption about them folding it in. I don't think they will, but if they do it will be a waste.

Also - your note about people you know using Amazon for all shopping needs doesn't mean that it will always be that way. Do you expect everyone to roll over because Amazon is the leader? Should nobody bother competing?

- Amazon has a LOT of fake reviews. - They're pissing off merchants by competing directly with them. - They often ship other merchant's products instead of your own if it's closer to the user.

I'm not that bullish on Jet either, but I wouldn't underestimate Walmart.

>In your anecdote, 30% have brand recall which isn't as bad as you make it seem.

I think you misread the parent - he said that out of 16 employees, 11 were millennials and none of those had 'brand recall' as you insist on calling it.

Oops you are right - I misread the anecdote. My mistake.

Apart from that, I'd bet that most or all of the 11 millenials would say Walmart is probably one of the least exciting, least cool brands they're know.

Amazon is one of the least exciting, least cool brands I can think of. It's right down there with walmart and other retailers on my list. But I use them all the time.

> will be quietly folded into Walmart

There are some huge assumptions built into your comment.

I think the GP probably meant that Jet is drastically cooler than Walmart, not Amazon. is a disaster of a company fundamentally.

How so?

They don't have any margins. When a consumer buys a product on their site - they have employees purchase from retailers or suppliers and ship.

So they've been eating the cost of shipping and overhead with no margins and have zero loyalty because they don't really have a unique value proposition.

They failed with their initial subscription model. They say they can keep costs low with their technology and rewards based shopping but they haven't proven anything.

It gets better with Walmart though - now they have a supplier and distribution hub that has great relationships with countless vendors.

> When a consumer buys a product on their site - they have employees purchase from retailers or suppliers and ship.

Walmart brings the solution to that to the table. They already have the merchandise, and infrastructure. While the general opinion of Walmart is that they are terrible, Walmart's distribution and transportation infrastructure is King in that world.

Currently fulfills orders by just going to the stores and purchasing and shipping.

Yes, that's exactly what I wrote. :)

I apologize, I think I replied to the wrong comment.

If 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.

  A public company like Walmart, there's some people doing 
  some math here.

  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.

  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.

It seems you're pointing out the obvious: that no investment 100% guarantees any sort of return. Surely "the math" discussed internally at Walmart includes both:

1) A calculation of risk/reward on this investment

2) Determining whether result of 1 appropriately reflects Walmart's risk profile.

Given that Walmart decided to acquire, it is safe to assume this investment's risk of loss falls within Walmart's investment profile.

My own observation is that the bets hardly ever pay off. Microsoft/Nokia is a great example but there are plenty of others. Maybe it's just confirmation bias, but I have trouble thinking of one counter example.

Adobe did buy AEM "when i was little" (you know, for like 20M or something I have no idea) and it has grown to 10x as much. However that is purchasing a smaller company...kind of like venture capital investment I guess. there seem to be plenty of examples where buying companies hasn't worked out (yahoo+tumblr comes to mind, and that's only recent news).

Sorry, not familiar with the acronym AEM. But you do give me an opportunity to modify my statement - it seems that the larger and more strategic the acquisition seems, the more likely it is to fail. And even when it doesn't fail, the synergies never seem to gel - what news of Zappos lately?

NeXt. Paypal. iTunes. Maybe Skype

NeXT? Are you kidding? Apple has done nothing but _loathe_ buying NeXT and their mercurial CEO. Huge waste of money. /s


The people with the best risk ratio are not the people with the most invested, therefore acquisition deals are almost always poor value for shareholders as top execs gamble other people's money with virtually no downside. Deal goes bad? Have $2m severance and get another huge job elsewhere. The incentives at play are perverse.

> A public company like Walmart, there's some people doing some math here.

Translation: "I can't see how this deal makes sense but WalMart is a huge company so it has to make sense even if to me it doesn't".

By that logic no big company would ever fail or screw up. Every time there's a huge acquisition there are some people here making this fallacious argument or a variation of it. There are always people "doing some math" inside these companies, that doesn't mean that the success of any given strategy is a given.

They're definitely doing the math, but to an objective outsider the numbers won't add up. We are all likely underestimating how hard it is to innovate inside a company the size of Walmart.

There are people doing the math.

The equation they're solving for is probably not, "How can we maximize Walmart's profits?", though. It's "How can I maximize my own immediate career goals?"

> keep dumping $500M/yr for it at a loss or what?

I think building Amazon wasn't cheap too. Amazon made losses for most of two decades straight, so Walmart dumping massieve money into building a competitor, with the insights of today, might still be cheap, relatively.

Amazon turned a "small" profit just the other day. Overall I think it's still fair to categorize it as a money losing venture (so far).

All shopping is going to be online and delivered for the same price as going to a big warehouse store. With the dash buttons and the third party integration Amazon is too big to ignore.

Walmart being a established multi-national company they can't really have unprofitable divisions or unprofitable quarters. This will be equivalent to Yahoo's Tumblr acquisition (a failure).... no amount of heads exploding blue dust will save this.

Here's an assessment of how Walmart was doing against Amazon -- from the year 2000:

... the case for Amazon getting crushed by Wal-Mart doesn't stand up when you do some side-by-side comparing of their Web sites. What's wrong with Put simply, it settles for taking orders for the products people come looking for rather than enticing them to buy things they hadn't even thought of buying.

It's 16 years later and Walmart still hasn't been able to compete with Amazon very effectively.

Amazon sells more than the next 10 biggest websites, combined.

It's useful to note that those 10 biggest websites are operated by large retailers with a physical presence, so it doesn't necessarily mean they're in trouble (walmart, macy's, home depot, etc.)

But the gap between Amazon and the next biggest e-tail site is huge. It's more of a canyon than a gap, really.

eBay isn't even one of the top 10 anymore? How the mighty have fallen, if that's the case. has much higher sales than Jet. It already is huge online, even if it's not Amazon huge. If anything, this is about pruning competition and buying potentially useful IP.

>even if it's not Amazon huge

are your serious?

Walmart's revenue was $482.1[0] billion in 2015 and amazon's was $107b[1]

[0] -

[1] -

edit - sorry, i missed the .com part

Parent referred to walmart.COM. Walmart online sales only $13B/yr, per

Even though I meant Wal-Mart e-commerce, this is a good reminder that the company remains huge despite concerns about its online sales.

Honest question: do any readers here really order from ? I am surprised they sell much at all, based on how much I personally have ordered from them (never).

I do. I price compare on larger purchases and have found cheaper occasionally. I've even done stuff from Sears, which has a multi-vendor marketplace as well. Both tend to have an addition 5-10% with Discover Deals as well, which I can't normally get with Amazon.

I've ordered a few times in the last couple months. They were cheaper than anywhere else (by a few bucks) and I did the store pick-up option to avoid shipping costs. In my experience, it's pretty quick shipping and the products are good quality

Thanks for the response.

Would $500m/yr even be enough? I guess they could leverage their existing distribution network and stores...

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.

This is a badly inaccurate description of how liquidation preferences work, both mechanically and also with respect to what's "market."

First, it's exceptionally unusual to see anything more than a 1x liquidation preference (i.e. investors receive their initial investment back before anyone else gets paid) among well-funded companies. It's somewhat common to see a 6-10% interest rate added on top, but a 3x liquidation preference is the VC equivalent of a payday loan.

The other component is whether the liquidation preference is "participating" or "non-participating." The easiest way to think about that is that a participating preference receives its initial investment back out of the sale proceeds, then shares in the remainder of the profits alongside the common stockholders. A non-participating preference is like a "greater-of" - basically downside protection in the event that the company is sold for a much lower than expected amount.

Suppose Jet's received $800m in funding like you said, and suppose the investors have gotten pretty aggressive terms - call it 6 rounds of funding that each took 20% post-money, all of which have a 1x liquidation preference and are getting 10% interest. Let's say the interest takes the preference to $1 billion because we're more or less making up numbers at this point, but we're in the right ballpark.

So the common stockholders (founders and employees) own 26% of the company at this point (.8^6), and a billion dollars comes off the top of the $3 billion sale amount. The common stockholders would therefore receive about $520 million.

The Walmart stock is publicly traded, so it's a lot like getting cash (though it may be subject to a short lock-up in a deal like this). Companies like to do combination cash/stock deals for a variety of reasons.

> First, it's exceptionally unusual to see anything more than a 1x liquidation preference (i.e. investors receive their initial investment back before anyone else gets paid) among well-funded companies

I've had options zero-out because the company, after investing with absolutely no preference given (which was part of what induced me to join), they took another round with preference funding at greater than 1x.

By "zero out," do you mean they were previously valuable and then dropped below their strike price after accounting for the > 1x preference? That sucks and I'm sorry it happened to you. It's still pretty unusual though.

Curious to hear - were any of the following factors in play: (i) the company was struggling to stay afloat, (ii) the company was located outside SF/NYC, (iii) the company had less-experienced founders?

The company was sold and my purchased shares were worth $0.00.

The founders had secured, until I joined, funding coming in without any preferences at all, or so management told me repeatedly. I don't know when that changed, or maybe management was lying to me all along.

Might be worth suing?

Another data point, I worked for a biotech that had to take a down round with 3x participating..

> For a company that needs hundreds of millions of dollars and is trying to beat Amazon? Let's say 3x. raised its A, A1, B1 and B2 with 1x liquidation preferences. Common will get a pay-out.

Since all of Jet's preferred stock is non-participating, their holders will probably receive a dividend, convert to common and then participate alongside everyone else. (All Jet preferred stockholders get an 8% dividend except A1, who got a flat 48¢ per share, so that's a bonus $45 or so million to preferred.)

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.

I've met plenty of startup employees who've spent years educating themselves about programming and <10 minutes reading about equity, stock options, etc.

When Myspace got bought by News Corp, some employees got almost nothing(people who came from intermix) and some got nothing(people who join myspace directly). Lots of employees left afterwards. There's a book about the whole deal called "Stealing Myspace".

There are fairly few F# jobs going around and Jet pays decent $.

It's not likely anyone is accepting 1/2 their market salary. Lots of companies are paying top dollar market only to be slightly less than Google.

Seemed like the founder worked hard to make it a nice place to work. Maybe they just like working there? :)

What you just described is basically unionization.

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.

> $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.

Jet isn't even located in the Bay Area, so comparing to Bay Area housing is sort of irrelevant (the exception being housing in NYC is close in cost to that in the Bay). Their headquarters are in New Jersey, so a good number of them could probably find fancy houses in NYC or nearby.

I was responding to the parent's assertion that with $10M you could buy a 'pretty nice home in the bay area' - has nothing to do with where Jet is based.

CA state income tax goes up to 13.3% (for >$1 million), it's 12.3% on taxable income of $526,444 up to the $1m threshold. There's also the ACA medicare tax of 3.8% on investment income (which applies to employee options) which kicks in if AGI is >$250k for Married Filing Jointly, >$125k for a single person. You can itemize and deduct state taxes paid (for now - some proposals to weaken or eliminate this), which cuts the effective CA state rate by your top marginal Federal rate (.396+.038=.434). Net net an employee making $1m from employee options (above and beyond a healthy base salary) resident in CA will pay about 50% in taxes between Fed and State. The #s in NY and NJ are a couple % less. I would support the ability for an employee to ''smooth out'' the tax liability of option value accrued over working many years, say for example by recognizing the income over 3-5 years (thus taking advantage of lower tax brackets), but I've never heard this seriously discussed by legislators.

Great summary, one caveat: You often won't see full deductibility of your state income tax because between state income tax, property tax, mortgage interest and/or childcare, you find yourself subject to the AMT.

I would also like the ability to do something similar to the way a business can depreciate an asset over time. How about the opposite: IRS tells us how many years you can spread an _appreciation_ out over. Currently the tax code penalizes the guy who works below market for years and then sees a lump sum payday. Why should it?

That said, I'd be happy if we just did away with dual-basis of ISOs and eliminate the rube goldberg AMT credits.

Good point. AMT has caused no end of heartburn around Silicon Valley and everybody should be familiar with it.

One of the two major Presidential candidates (who shall remain nameless) has proposed capping itemized deductions at 28%. I think this idea is more or less a bipartisan compromise acknowledging the political impossibility of eliminating specific deduction categories (e.g. mortgage interest, health care expenses, property taxes, state income taxes), each of which has a very loud and vocal special interest lobby. If passed this would be an effective tax hike felt very acutely by option holders of acquired companies resident in high state income tax States (in other words, entrepreneurs in Silicon Valley and New York).

Median home price in SF is $1m, in antioch it's $365k. But yes, I'm jaded and sarcastic, so I mean "pretty nice" in a "no shit it's pretty nice!" kind of way. Yes, it's literally an extreme overstatement, with humorous intent if not impact.

Re: taxes, capital gains.

For what it's worth, Jet is based in Hoboken, NJ.

> 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 (either directly or indirectly and in some cases very very indirectly).

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.

If the employees/common share holders are splitting say $1B, an employee's 1% is actually much more. It wouldn't be surprising to think the investor's preferred shares were ~50% of the equity or more, leaving the common shares with the remaining 50%. That employee's 1% is actually 2% of the remaining, so ~$20M using the numbers above.

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. You'll note that some other people in this thread are assuming various liquidation preferences just to validate their priors (employees always get screwed) with no real evidence to support their claims.

One way to look at it however is to consider the question "What is Walmart buying in this deal?" From my perspective they're not really buying a pile of code or a customer base or a brand name (none of that seems this valuable). What they are really buying is an energized and engaged team working until the leadership of a reportedly excellent CEO. They hope that this team will do a lot to help Walmart to capture a larger share of the future of e-commerce (where Amazon is clearly kicking their ass at the moment). So if a lot of the asset Walmart is buying is the people then it would't be an effective purchase if most of those people got screwed as part of the sale. This is just speculation on my part but I think it makes logical sense.

Spot on analysis. WMT is really doing a talent acquisition here. differentiated itself from AMZN through concepts like "happier work culture", which, given WMT's reputation, is rich in irony.

There 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.

Usually for large acquisitions like these the employees are kept on the same vesting schedules they were already on (especially if the company is so young). There is probably additional stock options issued for retention on top of this. So, if you have been there for 2 years, you are probably 50% vested, 1 year 25% etc. Typically if you have not reached your cliff, it is kept in place.

There are some circumstances where in a big acquisition like this founders or key employees are asked to re-start the vesting clock on their shares. This is more common in small buys but can happen in big ones too. In this case you get some payout for e.g. the 2 years you were there and then the rest of your stock (and maybe a refresher) get spread over 3 or 4 years.

In terms of payout, if you assume by series C that 50-75% of the company was sold to investors then $1.5B to $2.25B will go to investors and the remaining 750 million to $1.5 billion goes to founders and employees. Obviously this is a huge range and you need the cap table to know what really happened.

I don't know. But I can offer up some speculation. To do that we have to put in a guess about what "common" shares of stock would be worth, and how many of those shares our employees could access.

We know that Jet has been a bit unconventional in their pay practices [1] with their transparent salary metric. But we don't know how their options differ. Sometimes options have a "change of control" clause. In those cases the vesting schedule for common shares is accelerated when the company is acquired.

TechCrunch says "$3B cash plus $300M in shares to the Founders and employees". That sounds like part of the acquisition offer is stock offers to employees to come to Walmart. The new stock options would have cliffs and restrictions as well but they are for a publicly traded stock (so you know that you will be able to trade them, vs a private company where you may never be able to trade them). If the Crunchbase article is correct and there are 1K - 5K employees, we'll assume the distribution follows the power law but even with that, smallest grants would be at least $100K if distributed over 5K points with a $300M total.

Second there is the "value" of common stock. If the company had raised a total of $800M, and already had a 2x liquidation preference with participation, that would have $1.4B to distribute across the final common pool. In common scenarios that would mean that people who had been employed for a year or more would be able to exercise n/48ths of their stock option (where n was months of service as long as n was 12 or higher). The Tech Crunch article also said that they had been shooting for a $3B valuation in the last funding round. Given that jump you might expect common shares from the resulting acquisition to have a value that was at least 2.1 times their strike price. That might not represent a lot of money though, a million shares with a strike price of 10 cents a share, now worth 21 cents a share is a $110K gain. That said it would depend on how many shares were outstanding. If they had held back 20% of the share pool for employee options, and distributed half of it, that would be 10% of the company in options, or potentially $300M in value. That arbitrarily lines up with stock number quoted in the press release. If that relationship was accurate, it would suggest that Walmart was converting the options straight to Walmart share options (another common practice) where the acquiring company keeps the previous vesting schedule.

Lots and lots of variables. On the plus side, if an employee did have a stock option and it was at least partially vested, that option was probably worth non-zero dollars so in the world of startups that counts as a win. How big a win will vary from person to person.




very interested in the answer to this as well.

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.


If 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.

It'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.

This looks like a great program.

The next logical thing to do with the Jet Anywhere program is to launch a credit card that creates customer stickiness to While some of the incentives are great, e.g., 20% cash back at Nike, the process is cumbersome (receipt -> photo -> email -> wait -> cash back!!).

A cashback credit card would significantly reduce friction, with minimum overhead for Jet. If Jet doesn't want to get into the credit business, it can piggyback on the system deployed by MasterCard for Sam's Club [1]. Sam's Club is part of the Walmart umbrella of companies.


edit: Deleted redundant reference to Jet in the 2nd paragraph.

For 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.


Cashbackholic is not accurate from what I've seen, guess it's out of date. Cashback Monitor is accurate.

Meanwhile their own affiliate program offers something like a whopping 2%. No thanks, we'll send our traffic elsewhere...

They cap the total you can get in a year at $1000.

Most (all?) programs have a global cap. Where this one is unique is lack of per transaction caps.

A $2k roundtrip ticket gets you flat $2.25 from Orbitz [0], or $112.00 from Jet.

To hit $1k per year off the 5.6% rate is ~$18k spent on flights & hotels. I think most people won't come close.


I've made more than $1000 on more than one program (discover deals, shopathome, possibly splendor or close, somewhere in the same range on topcashback). None of those have per transaction or total limits.

I don't spend on travel, though, so rules may be different there.

I resell, so I'm also explicitly excluded from jet's program.

I wouldn't expect the average consumer to be a reseller, but that's an interesting point to consider.

Travel is a heavily restricted category. I wasn't able to find complete terms and exceptions for all of the programs you mentioned quickly, but for example, TopCashback caps flights from Orbitz at $3 [0]. Discover Deals doesn't seem to support flights besides one weird deal with CheapOAir [1].



It's funny how everyone was saying that Walmart would never pay $3B

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.

I'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.

"No wireless. Less space than a Nomad. Lame."[0]


Raise your hand if you have iTunes ...

Raise your hand if you have a FireWire port ...

Raise your hand if you have both ...

Raise your hand if you have $400 to spend on a cute Apple device ...

There is Apple's market. Pretty slim, eh? I don't see many sales in the future of iPod.

Slightly off topic but: "Plus, you can use it as a portable disk. No "content protection". Yay!"

That was one of the best features of the original ipod line. Not only did was it a device to play music with, I could also use it as removable storage.

Everyone always digs that out, but the first iPod was kind of lame. I don't think it's unfair for someone to have pointed that out at the time. Especially when it's a hardware product - sure, the line is going to get better but you're not going to get a free upgrade to it.

"Not unfair to point out" -- true.

But, the linked comment does miss the point. Specifically, it is doing a hardware spec comparison and not thinking about what it means when a large player is entering the market with a more-usable device.

And the linked comment (which is indeed an old chestnut) is typical of the spec-by-spec comparisons you still see in the tech press, and here on HN. It's a small reminder to look at the bigger picture.

That "someone" is Rob Malda, who ran Slashdot. In a way that comment embodies how the "old guard" on Slashdot was left behind in their predictions of what technology would become pertinent post-90s.

On the other hand if you look at iPod sales numbers he was right. Their sales really didn't pick up that much until they released some new models:

Some great throwback comments in that /. thread. Love it.

They are the highly technical types that quite bluntly aren't ever going to be entrepreneurs because that's not how they see the world. They just do everything themselves. Not a bad thing, that's just what it is.

Gah, I'm one of those people. Maybe that's why I don't have any money...

Coming to terms with the fact that I'm one of these people has been a mixed journey. Still working on/figuring out if this can be "unlearned".

It's strange how many aren't self-aware enough to realize when they aren't the target market.

I always assumed it was more about boasting than lack of self-awareness. Like how people post the same comment over again, I presume just to show they also thought of it.

It's a staple of online technology discussion, and has been for a very, very, very long time.

> No wireless. Less space than a nomad. Lame.

I'm not sure if it supports your claim given most of the top comments were pro-Ipod whereas the story summary had the quote you gave. The comments seem to guess at the benefits people would be claiming later on. Interesting looking back at a critical moment in the past anyway, though. :)

Would love to see this post if you have it handy.

#3 is still valid

Often this is just arrogance but sometimes big leaps get done that way. What if Wozniak hadn't been arrogant enough to think that he in his spare time and alone could build a better desktop computer than anything that's on the market?

Never underestimate the dumbness of walmart corporate LOL

Good 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.

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.

Why couldn't they show growth?

Amazon is getting worse for non-prime users. They've increased their free shipping limit, longer shipments, and kept pushing their deals onto Prime users only.

I've bought more from this year than Amazon in the last two years and Jet was faster with its free 2 day shipping than Amazon's free shipping.

There could be an opportunity for a competitor depending on how some Amazon issue play out over the next year or so. A lot of commentors are focused on the tech (which makes sense, being HN and all), but Amazon has some issues with counterfeit products, unequal product commingling, and unreliable third-party sellers.

Right now those issues are mostly side-line grumpling, but I could imagine a few big incidents could possibly blow up into a substantial reputation issue. The unknown, of course, is can/will Walmart do any better.

I just moved from the UK to the US. It is quite surprising how useless Amazon just became for me.

So far, every item I wanted to buy has $49 min spend for free shipping attached to it, which is not something I have had to deal with - except for a few add-on items.

So I just switched to eBay sellers instead.

I realize the price may end up being similar but I want to know what that price is while browsing, not "add $5.99" at checkout.

> Amazon is getting worse for non-prime users.

But the number of non-prime users is also dropping.... so Amazon doesn't really care that much.

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."

(Throw away for obvious reasons)

It is all total crap. We dumped a bunch of time and money into rebuilding everything as SOA and on all the latest technologies. Most of the work was done by an army of Indians that couldn't get jobs elsewhere in the valley. Absolutely nothing scales.

We have more servers in total than peak users to the site, and still can't get any respectable performance numbers.

The few smart people left here are super excited to jump over to Jet ASAP. - the photos shows there is a small army for Indians in Jet too. So do the "few smart people left here" want to jump over Jet now ?

We have close to 2,000 of them, and maybe 100-200 I would consider proficient in any type of technical role.

There was a massive push to hire as many developers as possible, so recruiting extended offers to everyone that applied. Senior engineers who have no degree or have ever worked at a tech company before.

I have no problem working with people who are capable of doing the work we need them to do.

Isn't that a problem with the recruiting dept ? and not generally with the Indians ? If the recruiters are not doing a good job, why blame your coworkers ?

Seems unlikely that America would import "no degree" Indians to work in tech

You don't understand big company politics. Number of reports determines whether a person is a manager, senior manager, or director and makes $120k, $170k, or $350k. The main metric of how good a manager is is simply butts in seat. Actually doing stuff doesn't matter.

The group in that photo seems like a pretty diverse bunch to me...

Absolutely nothing scales

Maybe that is the réal reason Doug bought it.

From your perspective is .com able to grow (handle growth) from tech. Stand point??

I hear they moved their back end to Node on Black Friday last year. If true that's damn impressive right? Unless it was a facade.

The node.js front end is on its second complete rewrite in the last 2 years, and a huge source of the scaling issues. Almost all the backend is still in Java.

An army of below average engineers working in a language with no compile time type checking is a guaranteed recipe for writing unmaintainable code that needs to be constantly rewritten.

Yeah Walmart labs is quite progressive. They're very active in the clojure community and do some interesting work.

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

As far as I know, Walmart labs is active in nodejs, front end and instrumentation. That's cool and all, but Jet knows how to build a lot more difficult things than that, like personalization, promotion planning, pricing strategies, etc.

Not compared to Amazon.

For $3B, they could have hired are pretty energized and engaged team. Seriously, whenever I see these big acquisitions by companies of a product they have been trying to develop internally, I always think about the person in charge of that team. I imagine that they are thinking that they could have done a lot more if they had been given a couple extra billion dollars to hire an amazing team.

Ya, the thing is they probably couldn't. Not really. It's not just about money. Think about how many big companies (including WalMart!) have plenty of money but don't have the internal talent or culture to really drive change and innovate in ways they never have before. Companies are funny things. A lot of the time they can do what they can do and really just can't do what they can't do no matter how much money they throw at the problem. Sometimes (though definitely not always!) an acquisition can really help.

I 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.

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.

Some 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.

#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.

Is there anything employees can do to protect against such a horrible Zynga situation legally?

Look for prior dickish behavior by the founding team, and run like the plague if you find any.

The common stock might be worthless if the last money in had a 2x or greater 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.

It 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.

You 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.

I 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.

So true!

It'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.

Walmart 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 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.

You'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".)

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 Jet on a regular basis. I try to avoid Amazon wherever possible, they're good but they have too much power so I try to help any alternative. Their selection isn't as good as Amazon, but usually it arrives quicker. Books are not quick, but cheaper than BN (even though BN ships them)

They must be burning lots of cash though. I placed a $100 order with about 7 items and it came in 6 different boxes.

> They must be burning lots of cash though. I placed a $100 order with about 7 items and it came in 6 different boxes.

It's an interesting business model for sure. They were spending $20-25m a month on advertising and then on top of that is selling things for less than they cost.

That's interesting. Mine have always arrived together in one box per order. Are you ordering a lot of books or some broad variety of items?

Yes was a variety, all came from different retailers.

I should add if Jet is now Walmart they aren't the small guys any more. Anyone have any alternatives?

Do you have any reason beyond principle to only use "small guys"?

I don't know if Jet was a "small guy" before the acquisition either if they had a 1B valuation. Plus pricing at a loss to get market share and compete with Amazon or get acquired by Walmart isn't really a small guy business plan. My idea of small guys I'd want to help is a local mom and pop stores. Maybe that guy likes the idea of helping start-ups though? It's his money

At this point, it's a generalized online marketplace that has been successful enough that some of the general public has heard of it and used it. 3B is QUITE a bit of money, I agree, but from a name and branding perspective in the age of Amazon, Jet has already made an impressive amount of progress where SO many others have failed.

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).

Amazon also gives you free shipping once you spend above $49. And if you have a business account you get two day shipping as well at the same threshold.

True, but every time I choose that option Amazon takes a week before they even ship anything. (it then arrives in a few days) Back before prime everything I ordered from Amazon shipped next day, or I got an out of stock email and the rest shipped the next day and arrived in a few days. Sure free shipping was advertised as whenever, but the reality was free shipping used to mean about a week not it means 2 weeks to a month. This is a massive loss in satisfaction. There are many things that waiting a week is acceptable, but two weeks is beyond what I'm able to plan in advance for.

I have never ordered enough from amazon to make prime worth considering. The troubles I've had lately mean I just assume Amazon won't ship in time and so once I see something on amazon that I think I want I look to see who else sells it. I'll pay $.50 extra to have it shipped the next day.

Get a business account and order more than $49 at a time and you'll get free two day shipping.

Also, note that Amazon may take time to ship because they're sending it between their warehouses to ship from a closer location. For popular items they'll likely already have one near you, but for less popular ones they move it around before final delivery. So just because it takes time to ship doesn't mean it won't arrive as fast as other options. What counts is the expected delivery time, which is given when you order.

But it doesn't work for items from third party sellers that don't participate in Fulfillment by Amazon. Jet's has no such restriction.

Jet's third party sellers will just add shipping into their cost. You aren't getting the discount unless the items are shipping together.

I 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.

To 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

Walmart's e-commerce growth has been declining every quarter, except Q4 2014 where it jumped +1%, since the beginning of 2014.

Walmart 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.

I use them regularly. Mostly for items that are cheaper than from Amazon. Also with money from their cash back program, Jet Anywhere.

I would suspect one portion of it is their dynamic pricing model. I wish there were more info publicly available about the mechanics.

> I would suspect one portion of it is their dynamic pricing model. I wish there were more info publicly available about the mechanics.

It's a pretty simple transfer of VC money to customers in an attempt to increase growth.

> It's a pretty simple transfer of VC money to customers in an attempt to increase growth.

I guess it worked.

I am. However, it depends on if you're a current Prime user or not.

If you don't have Amazon's Prime, you'll see why is worth it.

Amazon's free shipping for non-prime users are now 50$, takes 2-3 weeks to get anything, and they're limited the good deals to Prime users.

I've bought more from than Amazon lately because the above issues.

If I was willing to pay 100$ for Prime, isn't worth it.

My wife does. She's probably ordered from them between 10-20 times. I mentioned them to her and she uses them now and then when she realizes Amazon is overcharging for something.

Clearly she's mostly loyal to Amazon.

I have been using them more and more lately for random household essentials, since their prices beat Amazon a lot of the time, and shipping is typically 2-days, which is pretty good.

Call 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.

Are there any sources indicating what percentage of sales or units are from third-party retailers?

This 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?

Guess 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.

Based 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.

I 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.

So 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?


They came to my university to recruit last spring. I bet whoever got that job feels real good right now.

I doubt this will change the trajectory of Walmart. Bezos has the upper hand.

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.

Walmart doesn't have extremely over valued stock like another dot-com would that would pay with stock

bad yield on cash right now. Interest rates are low, so buying a company with greater ROE than near-zero interest rates is probably good. Unlike many big tech companies, Walmart also has plenty of debt already, their June filing indicated ~$39.4 billion in long-term debt, so adding to that is less appealing than just paying cash. Note: they could do what MSFT did with linkedin and later change their mind and issue debt, since it is very inexpensive to borrow, and Walmart has a good credit rating.

Walmart has money, am I missing something or is there a reason they would not want cash?

In 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.

You know it won't be unlabelled suitcases filled with cash right?

Of 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?

> 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 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.

This seems like a very average deal for investors. They would have similar returns if they invested that money in Amazon or Facebook stock

Compare this with Dollar Shave Club acquisition for 1B. Either Jet is overvalued or DSC is undervalued !!!! is a big user of the F# language. Will be interesting if they get Walmart on board too.

I know a few teams in Walmart Labs use Clojure, so there's at least some small percentage of the tech side adept in the functional world.

Very cool to see a startup built on .NET and Azure sell for $3B!

Some additional info on tech stack:

Disclaimer: Microsoft employee, Nazgûl is a pretty big user of Scalia already

It makes sense they want to buy Jet, since what they are currently using is dead.

Apparently the replacement has been proposed already, but the powers that be keep shutting that down, too.

Clojure as well, e.g.:

They're pretty language agnostic from what I've heard, not always in a good way.

Could you expand on this a bit? Does that mean that they don't have a common set of internal libraries?

That's a shame, I heard Scalia's been dead for a while.

On one hand, being bought for $3B. On the other hand, joining Walmart. (Sorry, could not help but being a bit redditish about it.)

Walmart has a killer IT department. They're known to run it like a startup.

What's bad about Walmart?

they won't make people stock the shelves at walmart for minimu... i mean $3 billion :)

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