RealTime IT News

HomeGrocer.com: Gone Fishing

HomeGrocer.com's co-founder and president Terry Drayton took a leave of absence last week. The top banana claims the 80-hour work weeks and emotional brain-drain from the online grocer's March 10th debut has him feeling punchy.

Drayton is headed for the hills until September, and at first blush, that looks like plenty of time for this latest market correction to blow over. I've known CEOs who get paranoid at falling stock prices; and to be sure, HomeGrocer's is a stinker. Five bucks to be exact.

Once upon a time, a CEO even relayed a bizarre story to me about how an angry investor set fire to a wastepaper basket outside his office door. He never saw the perp for himself, but to this day he swears by it.

Although, I don't think Drayton is paranoid of disgruntled shareholders. I've got another theory. Try this one on for size.

After a start-up taps the new issues market, there's your customary 180-day lock-up period before officers, directors, and lucky dogs on the friends and family list can sell shares.

If you add the chairman's four-month vacation to the two-plus months HomeGrocer's already been public, good ol' Drayton should roll back into town just in time to dump some shares after the lock-up. Almost to the day. Not much of a coincidence there.

And dealing with reality in the meantime is such a drag. The company hemorrhaged $43 million in its latest quarter and boasts about enough cash to last through the end of 2000.

With Safeway's latest land-grab of GroceryWorks.com in April, the brick-and-mortar giant hits Dallas, Texas before HomeGrocer has even established a toehold. Meanwhile, Royal Ahold scooped up a controlling interest in Peapod , and late last year, Albertson's unveiled e-delivery in Seattle. As if Webvan wasn't enough.

Let's see. I don't want to leave anyone out here. Kroger , Streamline.com , Quality Food, Kosmo, ShopLink.com and HomeRuns. Suddenly, five bucks looks like a fair valuation on HomeGrocer. And the way these newcomers spend money, the last milers are gonna run out of gas by the side of the road.

Earlier this month, HomeGrocer quietly took nearly three and half million shares of common stock off the table, after underwriters snickered at the over-allotment option. That means the war chest is about $35 million lighter than it would be in a raging bull market. An entire quarter's worth of cash-burn up in smoke.

Now Drayton's probably a little long in the tooth, 'cause he's not destined to become a newly minted gazillionaire. But for a guy who owns 5% of the company he co-founded, I'd expect a little more. After all, he's not standing in the bread line.

After drawing a handsome $200,000 yearly cash salary, he owns over 6 million shares in HomeGrocer. If that doesn't smooth things over a bit, maybe Drayton ought to roll up his sleeves and try baggin' groceries for a while.

On a side note, when Drayton returns from sabbatical in September, HomeGrocer has roughly 78 million shares coming off lock-up. And with an already chubby 22 million share float, investors should be the ones headed for the hills.

Any questions or comments, love letters or hate mail? As always, feel free to forward them to kblack@internet.com.