Originally published on April 6, 2000 and brought to you today as a time capsule.
Embattled online grocer Peapod, Inc. (NASDAQ: PPOD) might not be out of the running yet. The company is reportedly trying to raise cash from an unidentified source and is investigating whether it can recover a US$2.5 million loan to ex-CEO William Malloy.
The company has been smarting in recent days from a series of setbacks: the abrupt resignation of Malloy, who cited health concerns when he resigned; the loss of $120 million in promised investments, a lawsuit initiated by unhappy investors; and a scathing report by the company’s accountants — who said its viability as an ongoing concern was “uncertain.”
Peapod revealed earlier this week that it is in negotiations with an unidentified party for a “substantial equity investment,” and that it has received a commitment for an immediate bridge loan.
That’s excellent news for the cash-strapped company. When Malloy resigned in mid-March, Peapod warned investors that it had only $3 million cash on hand. Two weeks later, the company released its annual report with the cautionary statement: “Because of its limited resources, the viability of Peapod is dependent upon its ability to quickly raise sufficient capital to meet its cash requirements.”
Prior to Malloy’s resignation, Peapod had been counting on a cash injection of $120 million from four investors. However, with the news of Malloy’s resignation, Apollo Management LP, Pequot Capital Management, Yucaipa Cos and GRP II LP withdrew a letter of intent that they had signed with Peapod in February.
Peapod’s financial woes led investors to file a class action lawsuit claiming the company had issued “a series of materially false and misleading statements in press releases and SEC filings concerning Peapod’s cash funding needs.” The suit claims that these statements led to Peapod’s stock being artificially inflated.
Money from Malloy
According to the Wall Street Journal, Peapod is investigating whether it can reclaim a $2.5 million loan it made to Malloy when he was hired away from AT&T’s $6 billion wireless business last year.
Peapod reportedly gave Malloy a $2.5 million signing bonus and an additional $2.5 million loan to buy Peapod common stock. The money was to have become a gift after five years. The agreement also reportedly stipulated that the loan could be forgiven if Malloy left the company for a good reason.