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One of New York’s ride-hail players just bought its smaller, younger competitor. Gett, which started in Tel Aviv and has a strong presence in Europe, just acquired Juno for $200 million.
While Gett is acquiring Juno’s assets — including its founding team — Juno will still operate as an individual platform for now, called Juno by Gett.
Juno was co-founded late last year by Talmon Marco, the co-founder of Viber (which sold to Rakuten for $900 million), and pitched itself as the driver-friendly app. Its primary appeal was a stock program that would award restricted stock units to drivers who used the platform for 30 or more hours a week. The pitch: Work for a company that is half-owned by drivers.
However, in an email sent to drivers announcing the acquisition, Juno says it’s doing away with the program as part of the acquisition. Drivers who’ve already earned shares would be cashed out.
Several of the drivers who forwarded their emails to Recode are receiving around $100 for their shares, regardless of how many shares they had accumulated. One had roughly 1,600 shares, another more than 3,500 and another had more than 6,000.
“Eligibility to receive this additional payment shall be conditioned on your waiver of any and all related claims under the Juno RSU program,” the email reads.
Drivers are outraged. One said that while the low commission of 10 percent was a nice bonus, the real reason he drove for Juno was the stocks.
“I joined Juno because the promise of the RSUs were very enticing,” Juno driver Steven Savader told Recode. “Driverless cars will be around someday; it’s good to have the future taken care of.”
Another said they were promised that whether control of the company changed or went public, drivers would be in control.
“Their sales pitch was great: They said guys are driving for 30 years and they have nothing to show for it. Look at the Yellow Cabs; we’re going to do this much better,” Cory, who’d been driving with Juno since it started, said. “[They said,] ‘we listen to drivers’ grievances and make sure they’re taken care of in the future.’”
But it turns out, even before the acquisition, Juno was contemplating eliminating the RSU program as a result of compliance issues.
The email to drivers reads:
It is important to note that prior to when discussions with Gett began, Juno was in the process of considering changes to the RSU program to ensure compliance with U.S. securities laws following discussions with the U.S. Securities and Exchange Commission (SEC). The SEC had asked Juno to change how it was implementing the program going forward, specifically registering it or using an exemption from registration in a different manner. Given these discussions with the SEC, Juno was considering, among other things, whether the RSUs previously granted were void under the terms of the RSU program.
Juno wouldn’t elaborate on its issues with the government agency, but in an email to a driver, Marco says it was a taxation issue. The bottom line: If the company doesn’t have plans to IPO within seven years, drivers could be taxed on their shares immediately.
The email reads:
“The very specific issue is that the RSUs must be subject to a “substantial risk of forfeiture” in order to not be taxed or subject to Section 409A of the Internal Revenue Code. Conditioning payment on the completion of an IPO that occurs within no more than 7 years is viewed as constituting a substantial risk of forfeiture so long as an IPO/change of control is not substantially certain to occur at the time of grant... If the period is stretched to 8, 9 or 10 years, then this will be a very aggressive position and the argument could be made that drivers should be subject to taxation when the active condition has been met and not upon the later of the (i) active condition or (ii) IPO/change of control condition being met.”
Neither company would comment for this story.
Some of these drivers are considering reaching out to legal representation, others plan to report the company to Consumer Affairs and some refuse to forfeit their shares. But at this point it’s not clear what options they have.
From Juno’s end, the acquisition makes a lot of sense.
As we’ve written before, the business model seemed unsustainable. Before cars started carrying riders, the company was paying drivers $50 a week to be on the platform. When Juno launched, riders were given a 35 percent discount and drivers were only charged a 10 percent commission. Meanwhile, Juno had secured office space in the Freedom Towers as well as driver offices at LaGuardia.
This strategy worked for a bit. The company, which launched in May, performed a million rides by September. However, drivers say that when the rider promotions went away, so did the riders.
While Gett is only in New York in the U.S., the company has a strong presence in Israel and parts of Europe, giving Juno access to that footprint.
From Gett’s end, the advantage is less clear. While Juno amassed a decent amount of market share in a short time, much of it was due to the rider and driver promotions. Given current drivers’ outrage over Juno’s decision to sell to Gett, it’s not likely many of them will stick around.
So if Gett thought it was buying supply, they may not see much return on that investment.
“I don’t think I’ll drive for Juno or Gett anymore,” Savader, who today drives for Uber, Lyft, Juno and Gett, said. “I’m saving more commission with Juno and Gett but at least I know where Lyft and Uber stand. They treat us like dirt, but I know where they stand. Juno sold us false promises.”
“Gett is not the answer,” he said.
This article originally appeared on Recode.net.
