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Peapod considers possible sale as CEO leaves

Shares of the online grocer plummet after the resignation of its CEO and the cancellation of a potential $120 million investment.

Shares of online grocer Peapod plummeted today after the resignation of its CEO and the cancellation of a potential $120 million investment.

In midday trading, shares of Peapod were down $3.94, or 50 percent, to $3.88 following the announcement. Shares have traded as high as $16.38 this year.

The company said today that Bill Malloy, its chief executive, resigned because of health reasons. Andrew Parkinson, the company's chairman and co-founder, will take over Malloy's position.

In addition, Peapod said investors who previously signed letters of intent to invest $120 million in the company have withdrawn their offer. In February, Peapod said it had received letters of intent from Apollo Management, the Yucaipa Companies, Pequot Capital Management and GRP II.

Peapod said that its financial advisors, Wasserstein Perrella, will explore the company's options, including a possible sale. The company also warned it has suffered from "substantial operating losses" since its inception and currently has $3 million in cash.

The announcement comes as a number of online retailers have seen their valuations, as well as their general appeal, slowly fade. Just this week, entertainment giants Time Warner and Sony scrapped a planned merger of their jointly owned Columbia House music club with online CD retailer CDNow. CDNow said the company picked the wrong merger, while other knowledgeable sources cited increased competition from heavyweight, as well as a sagging stock price, as the cause.

Other companies, such as Value America and software retailer, have also witnessed management shakeouts amid scrutiny over meager profits and paper-thin margins.

The sluggishness of online retail stocks has also spread to Peapod's competitors. Last week rival HomeGrocer went public, but its shares are currently trading near its $12 opening price. Meanwhile, online grocer Webvan has seen its shares slip below its $15 initial public offering price.