After putting 22 million shares up for sale Friday at an asking price of $12 (US$) per share, HomeGrocer.com, Inc. (Nasdaq: HOMG) is facing widespread industry speculation that it will fail to attract investor enthusiasm in much the same way that rivals Peapod (Nasdaq: PPOD), Streamline (Nasdaq: SLNE) and Webvan (Nasdaq: WBVN) have faltered.
All three online grocery companies have seen their stocks languish after high-profile IPOs. Peapod went public in 1997 at $15 per share, and its stock now trades at about $9.
Streamline launched at $10 per share last June, raising approximately $56 million, and has seen its share price drop to the $7 range.
Webvan raised $375 million in November with an IPO at $15 per share. Its stock jumped to the $24 range for its first month of trading, but recently receded to the $12 range.
Have Online Grocers Crapped Out?
Despite having such high powered backers as Amazon.com, Kleiner Perkins Caufield & Byers, and the Barksdale Group, the Kirkland, Washington-based HomeGrocer has been all but left for dead.
Online grocers have “crapped out,” said senior IPO.com market analyst Jeff Hirschkorn of Homegrocer’s offering. “To me, the model is unproven, it doesn’t work, and people are going to have doubts about it.”
HomeGrocer is an online retailer that sells and delivers groceries in the Seattle, Washington, Portland, Oregon and Southern California markets. While revenue for the year ended January 1, 2000 rose to $21 million from $1 million a year earlier, the company’s net loss widened to $84 million from $8 million.
Troubles with Cyber Groceries
Last month, the Chicago, Illinois-based Peapod reported flat sales of $51 million for the nine months ended September 31, 1999 versus $52 million for the same period a year earlier. The company is now trying a new strategy of centralizing distribution in order to boost efficiency.
Streamline, based in Westwood, Massachusetts, saw its revenues grow to $10.2 million for the nine months ended September 31, 1999 from $3.8 million the previous year. Streamline sells groceries in the Boston area. It has recently expanded to Washington, D.C. and says it is expanding to New Jersey and Chicago.
The Foster City, California-based Webvan is ramping up operations. For its first nine months of operation, it reported just $4.2 million in revenues. However, the company said Thursday that it has signed leases for distribution centers that will allow it to expand into Baltimore, Maryland, Denver, Colorado, North New Jersey and Philadelphia, Pennsylvania.
Does Priceline Have Better Model?
A better model, Hirschkorn said, is Priceline.com, which is offering a grocery-shopping service that lets consumers compare prices and pick up their groceries at the local supermarket.
Investors looking for IPO values would do better to turn away from the e-tail sector, he said.