August 11, 2000 4:30 PM PDT
Value America files for bankruptcy, lays off 185
The Charlottesville, Va.-based company said in a statement it has filed for Chapter 11 bankruptcy and will concentrate its efforts on developing a services business to help companies take and deliver online orders. As part of the effort, the company laid off 185 workers, all of whom were involved in its e-tailing operation.
"The decision to shut down our Internet retailing business was difficult," Glenda Dorchak, Value America's chief executive, said in a statement. "Despite tremendous efforts on the part of our employees and the loyalty of our vendors and customers, it has become apparent that the prospect for near-term profitability of a company engaged exclusively in the retail side of the electronic commerce industry is not assured."
Value America said it has been in talks with potential investors and buyers who have "expressed interest" in its e-commerce services.
The company's Web site has been inaccessible since at least 12:45 p.m. PT today. A company representative said that before then, a note was posted on its home page that stated, "sorry we are closed."
Dorchak and other company executives declined to comment further.
Backed by Federal Express founder Frederick Smith and Microsoft co-founder Paul Allen, Value America had visions of becoming a key player in the e-commerce market. Those ambitions seemed attainable when the company saw its stock price triple on its first day of trading in April 1999.
Amid the high hopes came excesses, among them a corporate jet requested by co-founders Craig Winn and Rex Scatena, the company's chairman and vice chairman, respectively. Winn, whose Dynasty Classics filed for Chapter 11 bankruptcy in 1993, also reportedly considered developing a corporate campus for Value America with a three-hole golf course and hiking trails.
But since then, the company has been on a long and painful slide. Value America's stock price, for instance, has plummeted to the land of the penny stocks. Shares of Value America closed unchanged today at 72 cents at the end of regular trading.
In December, Value America announced a major restructuring that involved the departure of its two co-founders and a massive layoff of half its staff. The company also announced that it would miss earnings expectations.
In recent months, Value America has attempted to right itself, relaunching its Web site in March and receiving a $90 million equity investment in May from a group of investors including Allen, Smith and the Acqua Wellington North America Equities Fund.
Value America is just the latest online retailer to close shop. With investors increasingly skeptical of online retailers and their profitability potential, many e-tailers have been unable to raise the funds they need to continue operating. In recent months, Toysmart.com, Boo.com and Craftshop.com have closed their e-tail operations.