The move was announced by CEO David Sacks, who’s been on a cleanup mission of the company following allegations that it had skirted around insurance regulation. It seems founder Parker Conrad had written a software program called Macro to circumvent licensing requirements. And since the regulatory issues came to light, the company has laid off more than 350 employees.
Of course, Conrad promptly left Zenefits, with the then COO David Sacks saying: “The fact is that many of our internal processes, controls, and actions around compliance have been inadequate, and some decisions have just been plain wrong. As a result, Conrad has resigned.”
At the time, Sacks explained that he would lead a “top-to-bottom review to ensure appropriate and best-in-class corporate governance, compliance and accountability.”
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Now, in an effort to move past the scandals, Zenefits has proposed a settlement with investors that reprices its existing stock at a $2bn valuation and grants them additional shares in exchange for releasing the company of any possible legal claims.
Sacks suggested he had spent several months “in discussions with a number of major investors about to reset our relationship and get fully aligned with a new version of Zenefits.”
He added: “Since shortly after becoming CEO, I’ve been trying to maintain a relationship with investors in light of the fact that they, like I, were never informed about the Macro before investing in the company.”
The deal will see the ownership stake of Zenefits’ series C investors increase to 25 per cent, while previous investors will be given “small adjustments to offset their dilution.” The company’s common stock will also be diluted by 20 per cent.
“This is a unique situation. We’ve never seen it before and we don’t expect to see it again,” a spokesperson for Andreessen Horowitz, one of the company’s that invested in Zenefits, said.
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