July 9, 2001 12:45 AM PDT

Report: Webvan to seek bankruptcy

Financially troubled Webvan is reportedly planning to announce Monday that the online grocer will cease operations and file for bankruptcy protection.

KTVU-Channel 2, a Fox television affiliate in the San Francisco Bay Area, showed employees clearing out their possessions from the company's Oakland, Calif., warehouse and discussing their severance pay.

In addition, the company posted a message on its Web site Sunday that said: "We're sorry. Our store is temporarily unavailable while it is being updated. It will be available again soon."

Webvan spokesman Bud Grebey declined to comment late Sunday but said a press conference was planned for early Monday morning.

On the KTVU report, one employee told the TV station they had been given 80 hours of pay. The employee added that benefits would last for one month.

KTVU reported that the company had yet to make an official statement because it was still contacting employees.

Troubled times
Webvan has been struggling financially for some time, yet appeared to be rallying behind newly appointed Chief Executive Robert Swan, who took over after former CEO George Shaheen stepped down in April.

Swan has led a series of cost-cutting measures including laying off 885 workers and closing the company's Atlanta operations. Earlier this year, Webvan also shuttered operations in Dallas and Sacramento, Calif.

A little over a week ago, Webvan shareholders voted to implement a 25-to-1 reverse stock split to keep the company's shares listed on the Nasdaq market.

Webvan had been trying to fend off delisting from the Nasdaq since January, when the stock exchange notified the Foster City, Calif.-based company that its share price had fallen below Nasdaq's $1 minimum share price requirement.

Webvan's stock has plummeted since reaching a high of more than $30 during its November 1999 initial public offering. Webvan shares closed Friday at 6 cents.

For the quarter ending March 31, net sales totaled $77.2 million, up from $16.3 million. Net losses totaled $217 million, up from $57.8 million. The company operates in Chicago, Portland, Ore., Seattle, Washington, Los Angeles, the San Francisco Bay Area and Orange County.

During the company's downward spiral, Webvan was criticized for agreeing to pay Shaheen a severance package worth $375,000 a year--for the rest of his life. The deal also stipulated that Shaheen's wife was to be paid should he die first.

Webvan executives said that the deal was not guaranteed, however, should the company close down.

Shaheen was also allowed to repay a $6.7 million loan with $150,000 worth of severely depressed Webvan stock. Shaheen received the loan to pay taxes on a Webvan stock purchase, according to documents filed with the Securities and Exchange Commission.

 

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