Scratch That: Pets.com Shutting Down

Pets.com (IPET Quote) said it would close its doors, lay off 80% of its workforce and sell off most of its assets, including its Sock Puppet mascot.

The company, which went public in February at $11 a share and has since seen its stock fall as much as 96%, said it couldn't raise additional money or sell itself. In a statement that will likely send chills down the spines of executives of other ailing Internet companies, Pets.com said "no party was prepared to provide capital or acquire the company. In fact, out of the more than 50 prospects contacted, fewer than eight were even prepared to visit with the company." So much for the appeal of being the "leading online pet retailer," as Pets.com was still calling itself in its farewell press release.

"With no better offers and avenues effectively exhausted, we felt that the best option was an orderly wind down with the objective to try to return something back to the shareholders," said Chairman and CEO Julie Wainwright in a statement. Pets.com said it would lay off 255 of its 320 employees and sell assets including inventory, distribution-center equipment, content, intellectual property and the famous puppet icon.

Tuesday's move marks only one of the year's high-profile e-tailing collapses, after the Nasdaq's spring swoon caused funding from both venture capitalists and the public markets to evaporate. Companies including Toysmart.com, Eve.com, Furniture.com and Boo.com have all gone under or been acquired in some diminished form, while others have laid off workers or shifted focus. One that's still limping along: Petopia.com, a privately held competitor of Pets.com.

Pets.com's demise isn't good news for Amazon.com (AMZN Quote), which invested in Pets.com in March 1999 and included the company in its Amazon Commerce Network of e-tailers. Recently, Amazon has shifted its focus from signing up new Internet companies to finding more established partners like Toys R Us (TOY Quote) and Hewlett-Packard (HWP Quote). Pets.com was also backed by venture capitalist firm Hummer Winblad.

Shares in Pets.com rose 6 cents, or 9%, to 72 cents, in what can only be called a dead-cat bounce.