Zenefits, the controversial online HR and benefits provider, is in the news again. This time, several reports said the company has allowed large investors the opportunity to increase their ownership equity stake, causing the former unicorn firm's value to plummet from $4.5 billion to $2 billion.
According to media reports, CEO David Sacks, formerly the company's COO, wrote in a letter to employees that major investors including TPG Capital, Fidelity Investments, Insight Venture Partners and Andreessen Horowitz could increase their ownership from 11% to 25% in exchange for dropping their right to sue over the stock devaluation.
- A report in Med City News said Sacks wrote that "all of our employees and investors will be aligned, committed, and focused on what's next, which is the launch of Z2 (the next version of Zenefits) in October."
According to Med City News, Zenefits' investors approved the deal. It cited a spokeswoman for Andreessen Horowitz, who said the Zenefits revaluation is unusual. "This is a unique situation, we've never seen it before and we don't expect to see it again. We continue to believe in our investment in Zenefits; the company serves 20,000 businesses today and is one of the best examples of product-market fit we've ever seen," she said.
Med City News also reports that Andreessen Horowitz co-founder, general partner Marc Andreessen tweeted that his firm stands behind Zenefits: "For clarity, we did not threaten to sue, nor did we have any intention of suing. To resolve the situation, we signed up for the agreement and took a haircut in our ownership in the process," Andreessen tweeted.
Zenefits has made several moves to save itself since founder and CEO Parker Conrad left the company in the early part of this year.