Priceline.com Licensee WebHouse to Close Doors, Ending Name-Your-Price Groceries, Gasoline Servicesgreenspun.com : LUSENET : Grassroots Information Coordination Center (GICC) : One Thread
Oct 5, 2000 - 10:14 AM
Priceline.com Licensee WebHouse to Close Doors, Ending Name-Your-Price Groceries, Gasoline Services
The Associated Press
STAMFORD, Conn. (AP) - Shares of Priceline.com plunged 27 percent Thursday after Priceline WebHouse Club, a privately held licensee of Priceline that offered name-your-price groceries and gasoline, said it will shut down.
Founder Jay Walker said that WebHouse was unable to raise the capital needed next year to complete its business plan and start making a profit. As a result, WebHouse will shut down over the next 90 days. In recent months, Walker has sold off some of his stake in Priceline to investors such as Paul Allen's Vulcan Ventures and Liberty Media Corp. to attempt to raise money for WebHouse.
The announcement Thursday does not affect Priceline services such as air travel, hotel rooms, rental cars and home mortgages. WebHouse was licensed to use Priceline's Internet-based name-your-price system but was not part of Norwalk-based Priceline.
Also Thursday, a second Priceline licensee, Perfect Yardsale Inc., announced it was going out of business. The company offered used merchandise to consumers through the Priceline Web site.
On the news, investors sent Priceline shares down $2.56 to $6.81 in morning trading on the Nasdaq Stock Market. Shares are now trading more than 93 percent off the Stamford-based company's 52-week high of $104.25.
WebHouse said customers with unredeemed grocery or gasoline credits would be given refunds as well as extra money to cover the savings they were expecting to receive. Customers were being notified of the move by e-mail, and refunds will be processed by Oct. 20.
Walker, who also founded Priceline, said in a news release that WebHouse had been a gamble from the start.
"We specifically structured the WebHouse Club as a separate company from Priceline.com so that private investors, not Priceline.com shareholders, would bear that risk," he said, adding that he had invested heavily in WebHouse himself.
The company announced Sept. 15 that it was cutting 40 full-time and 100 free-lance jobs, but said at the time it planned to remain in business and was still hiring for some positions. WebHouse had about 2 million gasoline and grocery customers, with some 7,200 grocery stores and 6,000 gas stations participating in the service.
Although the companies are separate, Priceline has had its own troubles, announcing last week that its third-quarter earnings would come in below analyst expectations.
Priceline said it would take a non-cash loss on the warrant it held from WebHouse, which was recorded as a gain of $189 million in the fourth quarter of last year.
-- Carl Jenkins (Somewherepress@aol.com), October 05, 2000