Peapod is rapidly running out of cash. Earlier this month, the company revealed that a group of venture capitalists pulled the plug on a planned a $120 million investment in the online grocer after its chief executive Bill Malloy resigned because of health reasons. Shares of Peapod plummeted on the news, prompting the company to consider putting itself on the block.
Sources close to Peapod said the company is looking for an immediate $20 million infusion of cash.
"They are out of cash--if not today, they will be out within a week or two," said Barry Stouffer, an analyst at J.C. Bradford & Co. He added that without a cash infusion or an acquisition, the company is likely to disappear.
No companies have bid yet on the troubled online grocer. "Even if there's no real interest, it's a free look" at its inner workings, Stouffer said.
Peapod executives declined to comment on the possibility of a takeover.
"I cannot comment on the specifics of the process or on the parties with whom we have spoken regarding a possible interest in the company," Andrew Parkinson, Peapod's chief executive, said in a statement today. "I also cannot comment on whether or not we have received any indications of interest or offers."
With its sliding stock, Peapod is also facing a growing number of investor lawsuits. Just yesterday, law firm Schiffrin & Barroway filed a suit on behalf of some shareholders charging Peapod and some of its officers and directors with misrepresenting its cash funding needs. Earlier this month, law firms Abbey Gardy & Squitieri and Faruqi & Faruqi also filed a class-action complaint against Peapod. It is common for companies to face such suits after a free fall in their shares
Despite the rush of competitors into the online grocery market, consumers have yet to put full faith purchasing produce online.
Shares of online grocers have stumbled in recent months. HomeGrocer, which went public earlier this month, is trading below its initial offering price. Heavily funded Webvan is also trading off its initial public offering price. Both companies have spent heavily to build market share and brand names.
"Any of Peapod's competitors looking to potentially expand into Boston, Chicago, San Francisco and Dallas would be interested," said George Dahlman, an analyst at U.S. Bancorp Piper Jaffray. "Some online grocers might be interested in taking on only a part of Peapod."
Besides HomeGrocer and Webvan, United Parcel Services and European grocery chain Royal Ahold have also visited Peapod with an eye toward acquisition, the Wall Street Journal reported today, citing people familiar with the matter.
UPS may be interested in acquiring Peapod as a way of controlling the last mile to people's homes, as consumers begin to receive prescription drugs, dry cleaning and delivery of other consumer goods, according to Arvind Bhatia, an analyst at Southwest Securities.
Earlier this month, Peapod said it had $3 million to cover its operating debts.