My preference runs towards squeezing the actual melons. <gg> I also have to admit that I partake of the occasional Brach's, though I only shake a Coke bottle if I have no intention of buying it.
IMHO, WBVN's biggest mistake was to attempt an aggressive multi-market rollout. They should have entered one market at a time, worked out the kinks, hit break-even and moved on to the next city. Unfortunately, the nature of the bubble encouraged everyone to think "big."
On the plus side, Shaheen may have to go back to work:
thestreet.com
Schadenfreude Has Its Day at Webvan CEO's Expense
By Tim Arango
Staff Reporter
7/9/01 5:24 PM ET
Maybe George Shaheen didn't get one over on Webvan (WBVN:Nasdaq - news - commentary) shareholders after all.
Some investors were rejoicing Monday after the online grocer said it would shut down and file for bankruptcy. While the Chapter 11 filing will render the e-tailer's stock worthless, it also derails the well-chronicled CEO gravy train that stood to pay Shaheen millions of dollars as the company hemorrhaged and investors lost their shirts.
Plenty of investors have lost money in Foster City, Calif.-based Webvan, which was briefly worth as much as $10 billion after its late 1999 IPO. (Shares last traded for 6 cents on Friday, valuing the company at $29 million.) Now joining their ranks is Shaheen, who left the company in May with a sweet severance deal that was to pay him $375,000 a year for life. But now the executive will see little of that money as Webvan wends its way through bankruptcy court, lawyers say.
Standing in Line
Shaheen, who left his $4 million-a-year job running Andersen Consulting in September 1999 to head Webvan, will now stand in line with other unsecured creditors, such as vendors and landlords, as the courts dismantle the company, lawyers say. Unsecured creditors stand ahead of shareholders, who typically get nothing.
But Shaheen is unlikely to receive anything close to the money owed him. Steven Abramowitz, a partner at Vinson & Elkins in New York who is knowledgeable in bankruptcy law, says the best unsecured creditors can hope for is pennies on the dollar.
"He's not likely to get a hundred cents on the dollar," says Abramowitz. "He will have an unsecured claim like any other creditor."
The fate of Shaheen's severance package was bandied about by shareholders on Internet message boards Monday. "Bankruptcy renders the financial package worthless. ... Thank God!!!!!" read one message.
And Shaheen is still at risk of receiving nothing, Abramowitz says. Abramowitz says that other creditors could argue in court that Shaheen's severance deal should be voided on the basis that Webvan was insolvent at the time it agreed to the payments. With the company burning through about $830 million of venture capitalists' and shareholders' cash during its brief life and the stock in the low single digits for many months, many questioned why the company agreed to pay Shaheen such a rich contract.
Shaheen, who still lives in California and is not known to have taken a new job, couldn't be reached for comment.
When Shaheen joined Webvan, much of his compensation was to be paid in stock. According to documents filed with securities regulators, Shaheen received an option to purchase 15 million shares at $8 a share, in addition to a $13.5 million bonus to buy 1.25 million more shares. This was on top of a relatively modest -- by CEO standards -- $500,000 salary, with the possibility of a $250,000 bonus.
Winding Down
Meanwhile, Webvan won't pay severance to any of the nearly 2,000 workers who were let go Monday, says Bud Grebey, a Webvan spokesman. Employees will receive money for accrued vacation pay, and bonuses through the first half of the year will be paid. The company's nearly 1,700 hourly employees will receive $900 apiece from an anonymous donor, Grebey says.
As of the end of June, the company had about $40 million in cash, down from nearly $100 million on March 31. As of March 31, the company had $96.5 million in liabilities, according to a Securities and Exchange Commission filing. The company has virtually no secured debt, Grebey says.
The company says it will sell off its assets and cease operations, as opposed to restructuring and continuing in business, as some bricks-and-mortar retailers have done. "The problem with most dot-coms is that their only real assets are customer lists and intangibles," Abramowitz says.
In contrast, retailers with actual shops often enter bankruptcy proceedings to restructure their debt and then remain in business in some form. Ames Department Stores (AMES:Nasdaq - news - commentary) is one notable example.
In a last-ditch attempt to stave off bankruptcy and keep itself listed on the Nasdaq, in April the company announced a sweeping restructuring plan that featured about 900 job cuts and plans for an unusual 1-for-25 reverse stock split. The company has now abandoned plans for the stock split.
Webvan shares last traded at a nickel. Shortly after its 1999 IPO, the stock traded as high as $34. |
