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Peapod shares rally on possible cash infusion

Peapod shares rallied up 9/16, or 20 percent, to 3 1/4 Tuesday after the struggling online grocer said it may have found a sugar daddy.

Company officials said it's in discussions with an unnamed party regarding a "substantial equity investment."

As part of these negotiations, the company has obtained a commitment from the party for an immediate bridge loan.

Peapod (Nasdaq: PPOD) shares have been in a free fall of late, falling to a 52-week low of 2 1/2 last week.

Peapod's troubles came to light last month when it said it might have to put itself up for sale after four firms canceled a $120 million investment after CEO Bill Malloy resigned.

In the company's annual report filed last week, Peapod's independent auditors, KPMG LLP, said recurring loses from operations have drained its available cash, raising concern about whether the company could stay in business.

Malloy's departure nixed Peapod's plan to sell $120 million in preferred shares to Apollo Management, The Yucaipa Companies, Pequot Capital Management and GRP II.

Peapod hired financial adviser Wasserstein Perella to find alternatives, including other financing or the outright sale of Peapod.

Company co-founder and Chairman Andrew Parkinson replaced Malloy as CEO.

The grocer has just $3 million in cash. Last November, Malloy said Peapod had enough cash to last through the third quarter of this year.

In its latest quarter, Peapod topped Street estimates but still lost $9.1 million, or 50 cents a share, on sales of $21.6 million.

At the end of the fourth quarter, Peapod said it had more than 111,000 customers.

Its shares peaked at 16 3/8 in November.

Four of the five analysts tracking the stock rate it a "hold."