On November 5, 1999, I wrote an article about “First Mover Disadvantage.”
Basically, I talked about how being a first-mover is no guarantee of
success. Actually, the first-mover may be too early.
A classic example is Peapod (PPOD)
, the first online grocery store. Even though the grocery market is
huge, the fact remains that margins are razor thin. The result has been
disaster for Peapod.
In my November column, I wrote: “Thus, at $15 per share, Peapod is no
bargain. It could easily go lower and lower.” And it has.
Yesterday, the stock collapsed. The stock price plunged $4-3/32 to
$3-23/32.
I consider the situation similar to Pointcast. Pointcast was the darling of
Silicon Valley several years ago. The company had devised an exotic
technology known as “push,” in which content was distributed to desktops
using a screen saver. It was cool. It was a first mover. It imploded. The
company was sold for scrap last year.
As for Peapod, it has been Pointcasted. Again, even at current prices,
Peapod is still no bargain.
Yesterday, the CEO, Bill Malloy, resigned from the company (he cited health
reasons). He has been CEO only since September 1999. What’s more, the
letters of intent to raise $120 million for Peapod have been nixed. There
is a mere $3 million in the bank account. The investment banking firm of
Wasserstein Perrella & Co. Inc., has been hired to “explore strategic
alternatives.”
Add to this the fact that investors have been negative on the e-tailing
sector. The online grocery space is also very competitive — Webvan,
NetGrocer and HomeGrocer.com have substantial resources.
All in all, Peapod is headed for quick extinction. Remember, in the event
of a bankruptcy, it is the shareholders who are last in line to collect
proceeds from a liquidation. Peapod should definitely not be on investors’
shopping list.
