Zenefits this week succumbed to outside pressure following its latest funding round by agreeing to cut how much the company is worth and hand over more control to investors.
The deal will give investors like Fidelity, TPG, Andreessen Horowitz and Insight Venture Partners a new combined stake of 25 percent, up from about 11 percent, while slashing the company's valuation from $4.5 billion to $2 billion, reported Reuters. By signing the deal, investors also agreed not to bring any claims against the company.
In an emailed statement, CEO David Sacks characterized the steps as wise. "I want to thank our investors for reaffirming their confidence in us," he said. "We take our commitment to you seriously to build value for all shareholders."
Zenefits, which makes free human resources software for businesses and acts as a health insurance broker, has seen its financial books burned this year by accusations from regulators that it didn't comply with state licensing requirements for brokers.
Updated at 8:55 a.m. PT with company comment and additional information.