Webvan Auctions Assets as Cash Squeeze Hits

Ailing online grocer Webvan (Nasdaq: WBVN) began selling about US$2 million worth of assets Tuesday that it once hoped to use for an aggressive West Coast expansion.

Webvan sold goods worth an estimated $1.3 million at an auction held Tuesday in Kent, Washington, near Seattle. Most of those items, ranging from a lobster tank to meat slicing machines, were from a kitchen warehouse where Webvan once planned to make prepared foods for delivery. That plan never got off the ground.

Foster City, California-based Webvan also is seeking a tenant willing to lease its 350,000-square-foot warehouse, built at a cost of about $25 million last year.

A second auction of similar goods is planned for May 30th at an Oakland, California facility, according to Charyn Auctions, the San Francisco, California-based firm overseeing the asset sales. The items at the Oakland facility are valued at $700,000.

According to published reports, Webvan also has been shopping items, ranging from delivery vans to warehouses, from other markets that it has since departed, including Atlanta, Georgia, and Houston, Texas.

Long Decline

The asset auctions highlight how far Webvan has fallen.

In July 1999, before it went public and a month after its formal launch, the online grocer announced that it had signed a $1 billion contract with construction giant Bechtel to build fully automated grocery distribution centers in as many as 26 U.S. markets over a two-year period.

However, the bottom then fell out of the market for technology stocks, sending Webvan on a bumpy ride that has yet to end. The company curtailed plans to compete on the East Coast and later dropped service in Atlanta and other cities outside what has become its West Coast base.

This year, Webvan has shed nearly 1,000 jobs and warned in its recent quarterly report that more cuts could be on the way. While it has enough cash to last through the end of this year, Webvan said it will need to raise as much as $25 million to survive until profitability.

Short-Term Troubles

The grocer also made unwelcome news for itself when it was revealed that recently departed chief executive officer George Shaheen will receive $375,000 per year for the rest of his life as part of his severance package.

Webvan got additional bad news this week from outside the company when Jupiter Media Metrix cut its forecast for the growth of online shopping in half.

Jupiter now says online grocers will do $1 billion worth of business this year, instead of $2 billion as earlier expected, though the research firm remains upbeat about the sector's ability to survive in the long run.

Webvan stock was unchanged at 13 cents in early trading Wednesday. The stock, a candidate for delisting by the Nasdaq, has not seen the $1 level since November.