Webvan shuts down operations, will file for Chapter 11
Jul 10, 2001 12:00 PM, Misty Reagin
Foster City, Calif. – Locally based Webvan Group Inc. has shut down its online grocery-delivery service and plans to file for Chapter 11 protection within the next two weeks.
The company has spent nearly $830 million since its June 1999 inception without turning a profit. The company invested much of that money into high-technology warehouse facilities and an ambitious 26-city expansion plan. In addition, analysts estimated that the company absorbed approximately $10 to $15 in extra costs on each delivery.
Webvan's stock, once at an all time high of $34 per share after the November 1999 initial public offering, has been stuck below $1 per share all of 2001. Nearly 2,000 employees have been fired, and the remaining 100 employees will stay behind as the company files for Chapter 11 bankruptcy protection and winds down operations.
In addition, Webvan’s former CEO George Shaheen was supposed to receive $375,000 annually for life as part of his retirement package. Instead, Shaheen is expected to become an unsecured creditor and will need to file a claim against the company when it begins bankruptcy proceedings.
