Zenefits Lost Two-Thirds of Its Value

The valuation of once high-flying technology leader Zenefits is less than $2 billion now, or 65 percent less than its May 2015 high point, following another write down by mutual fund giant Fidelity Investments.

The write down, reported Wednesday by the Wall Street Journal, was part of a flurry of valuation drops by Fidelity, reflecting its analysis of what its investments in a number of huge private technology companies were worth at the end of February.

After a 65-percent hit, Zenefits’ valuation would be a mere $1.575 billion, nearly $3 billion less than just nine months ago.

But the huge drop shows the danger of putting a value on a private company’s worth at a given point in time, without the data and reporting requirements that public companies are subject to. With no open market in its stock, a lot of educated guesswork is involved.
Software companies like Dropbox Inc., Cloudera Inc. and Domo Inc. — once heralded as unicorns — also took big hits from Fidelity’s revaluations. But it’s Zenefits, the San Francisco-based HR and insurance brokerage software company, that continued a fall from grace almost unbroken since a $500 million Series C funding round last May gave it a $4.5 billion value.

According to the Journal’s Startup Stock Tracker, Fidelity bought private shares of Zenefits last May for $14.90 a share and valued them as of Feb. 29 at $5.20 a share. That was a drop of 35 percent from the prior quarter and 65 percent — nearly two-thirds — since Zenefits garnered short-lived glory with its huge valuation.

Since then, founder and CEO Parker Conrad has been ousted, former COO David Sacks took over, 250 staffers were cut, the company has been investigated (so far without result) by state insurance regulators in Washington, California and reportedly other states, and its reputation has been badly tarnished.

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