Pets.com Closing Up Shop

Finding neither buyer nor financial angel after a five-month search, Pets.com (IPET Quote), an online retailer backed by Amazon.com (AMZN Quote) and famous for its sock puppet mascot, sent home 255 of its 320 employees Tuesday and announced it would shut down the Web site and the company.

Merrill Lynch, lead underwriter of the company's initial public offering earlier this year, said it had contacted more than 50 potential saviors, both corporate and financial, both domestic and international, but that "fewer than eight were even prepared to visit with the company."

The search began in early summer, Pets.com said, meaning that it encompassed roughly half the time Pets.com was a publicly traded entity. On Feb. 11, as the initial public offering market was handing out the last of its hefty multiples to Internet technology companies, the Web site raised $82.5 million on 7.5 million shares.

On its rush to the IPO market, the company had faced competition from three other Web sites -- Petstore.com, Petopia.com and PetsMart.com, majority owned by the bricks-and-mortar chain PetsMart(PETM Quote). Despite the interest and publicity, the shares closed at the $11 offering price on the first day of trading. They have slowly plunged ever since.

By the end of trading Tuesday, Pet.com's stock was valued at mere pennies, having fallen 44 cents, or 67%, to close at 22 cents after reaching a 52-week low of 6 cents.

The company had $23.1 million as of Oct. 1. A spokesman for the company, John Cummings, said the company's burn rate was falling.

"It was high risk," said Timothy G. Fogarty, an analyst for Thomas Weisel Partners which co-managed the stock offering along with UBS Warburg and Bear Stearns. "There was always a chance. They just couldn't turn around the profitability. I think the writing was on the wall."

The site's high-profile backers included Hummer Winblad Venture Partners, a venture capital firm, and Comcast Interactive Capital, a unit of Comcast.

Amazon.com, which bought a 30% stake for $60 million in cash, said it had kept the Web site at arm's length, accounting for its losses every quarter. The investment was booked as a $0 value in the most recent quarter, said Patty Smith, a spokeswoman for Amazon.com. It was not a part of the sort of virtual shopping mall the company calls its Amazon Commerce Network. Living.com, a furniture retailer that was part of the network, shut down in August. Amazon had purchased an undisclosed stake in that retailer for less than $10 million, Smith said.

Pets.com said it planned to sell its inventory, distribution center equipment, URLs, content and intellectual property, including the sock puppet. It was a dog. Its catch phrase was: "The horror."

As for the sock puppet's value, "this is an argument for individual investors," said Fogarty, the Thomas Weisel Partners analyst. "I can tell you the institutions aren't interested."