Four venture capital firms yesterday withdrew a potential $120 million investment offer to Internet grocer Peapod after company president/CEO Bill Malloy abruptly resigned.
Malloy quit for unspecified health reasons after taking the job only six months ago. The sudden loss of its CEO and a major loss of financing has left Peapod’s future uncertain at best.
In a statement, the company said it had experienced substantial operating losses since its inception and was left with only $3 million cash in hand before trade debt.
“The board of directors has directed its financial investors, Wasserstein Perrella & Co. Inc., to explore strategic alternatives available to the company, including possible alternative financing or a possible sale of the company,” Peapod said.
“There can be no assurances that the company will be successful in finding or completing a transaction or that the company’s resources will be sufficient to enable it to continue its operations during this process,” the statement added.
News of this development sent Peapod stock into a tailspin. Peapod stock on New York’s NASDAQ index was trading at $3.50, down 55 percent from Wednesday.
Telephone calls to Peapod executives were not returned.
Although its customer base grew by 20 percent, Peapod recorded fourth-quarter 1999 losses of $9.07 million, up 7 percent from $8.51 million in the same 1998 period. Net sales for the same 1999 fourth quarter inched higher to $21.6 million, from $17.2 million in 1998.
Andrew Parkinson, who co-founded Peapod with his brother, Thomas, will add president/CEO to his company chairman title. Peapod started life in 1989 as a retailer of dial-up software and modems. In 1998, it forayed online into grocery delivery and sale of consumer shopping data.
The Peapod.com service currently has 100,000 customers and is one of the pioneers in the online grocery market. It faces stiff competition from well-funded Internet-only grocers like Webvan.com, HomeGrocer.com and NetGrocer.com. among others.
The multi-million-dollar equity investment from Apollo Management L. P., The Yucaipa Companies, Pequot Capital Management Inc. and GRP II L. P. was intended to expand Peapod’s reach and fund new distribution warehouses.