Updated from 10:12 a.m. EST

Shares of



plummeted 52% Thursday after the company said it might not have enough cash on hand to continue its operations, in an announcement that highlighted the weakness in the online grocer market.

The company said that its chief executive had resigned for health reasons, and that as a result of his departure, a consortium of four companies backed out of its $120 million investment in Peapod, leaving it with only $3 million on hand.

Peapod said it was considering a sale of the company.

Shares of Peapod tumbled 4 23/32, to close at 3 23/32, a new 52-week low.

The $120 million investment -- by Leon Black's

Apollo Management

, Ronald Burkle's

Yucaipa Cos.


Pequot Capital Management



-- was announced just a month ago, on Feb. 14.

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The company, based in Skokie, Ill., hired investment bank

Wasserstein Perella

"to explore strategic alternatives available to the company, including possible alternative financing or a possible sale of the company," Peapod said in a statement.

"There can be no assurances that the company will be successful in finding or completing a transaction or that the company's resources will be sufficient to enable it to continue its operations during this process," Peapod continued.

Bill Malloy, Peapod's chief executive and president, is resigning immediately. He is 47 years old and joined Peapod last September from


(T) - Get Report

, where he was the executive vice president of wireless operations. Chief executive duties will now be assumed by Andrew Parkinson, Peapod's chairman and co-founder along with his brother Thomas Parkinson.

The news comes just three weeks after Peapod reported its fourth-quarter financial results and announced the acceleration of a new strategy. "There's a new Peapod in town," Malloy said at the time.

But Peapod has had difficulties competing with its Internet rivals







(HOMG:Nasdaq), as well as conventional supermarkets that are also moving toward the Web.

Peapod has experienced substantial operating losses since its inception in 1989, when it offered dial-up software and modems. The company started its Web operations in 1998.

For the three months ended Dec. 31, Peapod reported an operating loss of $9.07 million, 7% more than the $8.51 million loss it reported a year earlier.