George S. May Business Blog

Amazon buys Zappos for $928 million

Amazon.com has purchased the up and coming ecommerce site Zappos for 10 million Amazon shares, or $880 million. Although the Amazon release said it was $807 million, it was actually based on a trailing 45-day estimate of its share price. Closing price today bumps the deal up to $888 million. Along with the deal, Zappos employees will get $40 million in cash and restricted stock and current Zappos management will remain in place. In the end, the deal is more like $928 million.

As for the long list of Zappos’ investors, as Tech Crunch put it:

“This is a great exit for Zappos’ investors, including Sequoia Capital and Venture Frogs , who put in about $60 million in seven rounds.”

Those close to Zappos say the company has long struggled with its desire to build for the long term and pressures that come with having to deliver a return for investors. The way the deal is being described to employees, it’s less an acquisition and more a swap in shareholders.

Zappos CEO, Tony Hsieh, posetd a letter to his employees that can be found here . In a letter to employees he writes :

We plan to continue to run Zappos the way we have always run Zappos – continuing to do what we believe is best for our brand, our culture, and our business. From a practical point of view, it will be as if we are switching out our current shareholders and board of directors for a new one, even though the technical legal structure may be different.

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