In an email to employees, Zenefits, the human resource software startup announced that it was slashing its valuation from $4.5 billion to $2 billion. This move comes close after former CEO Parker Conrad was accused of circumventing state licensing requirements.
The startup had raised a valuation of $ 4.5 billion in two years after it had automated traditional human resource tasks such as payroll and compliance. Disaster struck for the company when it was revealed that Zenefits had not only allowed sales persons working for the company to circumvent licensing requirements in seven states in the US but that former CEO Parker Conrad had also created a secret software program, Macro, that helped its brokers to forge the online training course that is mandatory for brokers.
Zenefits’ current CEO David Sacks was cleared of the allegations during an investigation. However, post the scandal, Zenefits, in an effort to pacify its investors, has proposed a settlement that reprices its existing stock at a $2 billion valuation. The settlement also grants investors additional shares in exchange for purging the company of potential legal claims.
