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Online grocer Webvan (Nasdaq: WBVN) said Monday it has ceased operations in all its markets and will file for bankruptcy protection.
"The company has no plans to resume operations, and it will pursue an orderly wind-down of its operations and sale of its assets and business," Webvan said.
Chief executive officer Robert Swan said that while the company "made significant progress" in cutting operating losses and reducing its burn rate, order volume in the quarter just ended "declined considerably," accelerating the need for new capital.
"We took this action rather than continuing to operate with high losses and decreasing cash," Swan said.
Webvan plans to file for protection from creditors under Chapter 11 of the U.S. Bankruptcy Code.
Deliveries End
Webvan said about 2,000 workers lost their jobs as a result of the shutdown. All operations have ceased, including deliveries of existing orders, the company said. Webvan's Web site did not appear to be working Monday morning.
The announcement comes just days after Webvan shareholders approved a 1-for-25 reverse stock split that would have kept the company's shares trading on Nasdaq. The stock split will not be implemented, the company said, adding that it expects its shares will now be delisted.
Webvan shares closed Friday at 6 U.S. cents, down from an all-time high of $25.44. The shares had not traded above $1, the minimum requirement for a Nasdaq listing, since last November.
Out of Time
Webvan, which has been exiting markets and selling assets in an attempt to stay afloat, had previously said it had enough cash to survive through the end of the year, but would need as much as $25 million to keep going until the first half of next year, its target for profitability.
"The clock has run out on us," said Swan.
Last week, Webvan scheduled an auction to sell $30 million worth of equipment in a bid to raise cash. The items, including refrigerated delivery vans, office furniture and a warehouse order-fulfillment system, were from the Atlanta, Georgia area, which Webvan stopped serving earlier this year. The company previously auctioned $2 million worth of goods.
Bricks and Clicks
Consumers have not taken to the idea of buying groceries over the Internet, and many e-tailers attempting to market grocery services got out of the business a long time ago.
Meanwhile, brick-and-mortar supermarket companies have been building up their online operations. Tesco of the United Kingdom recently announced a partnership with U.S. supermarket chain Safeway, and Royal Ahold of the Netherlands last year came to the rescue of Peapod (Nasdaq: PPOD), a Webvan competitor that was struggling to stay afloat.
"I think something like that, where you've got a brick-and-mortar chain doing an online thing as sort of an extension of the brick-and-mortar store, is the only thing likely to succeed," David Kathman, e-commerce analyst for Morningstar, told the E-Commerce Times. "The problem is, Webvan had to start from scratch."
A corporate parent could also have solved Webvan's funding problems, said Kathman.
In the current market environment, he said, there was little chance
an investor would have given Webvan the $25 million it said it needed to survive.
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