Rite Aid Selling Drugstore.com Shares

One beleaguered drugstore outfit is trimming back its stake in another.

Rite Aid

(RAD) - Get Report

disclosed late Friday it plans to dump a large block of shares it owns in Internet retailer

Drugstore.com

(DSCM)

. On Monday, shares in both companies tanked in a mostly negative session for the stock market in general.

Rite Aid filed late Friday with the

Securities and Exchange Commission

to sell 1.2 million Drugstore.com shares valued at about $3 million. In January, Rite Aid sold 1.4 million Drugstore shares for about $4.4 million, said Sarah Datz, a spokeswoman at Rite Aid.

After the latest batch of shares is sold, Rite Aid will hold just under 6 million shares, or less than 10% of Drugstore.com. Rite Aid purchased about 9.3 million Drugstore.com shares in 1999, which then amounted to over 25% of the company.

Drugstore.com shares dropped 21 cents, or 9.2%, to $2.08. The company, formerly a dot-com highflier whose shares once traded above $60, is now virtually ignored by Wall Street; only a couple analysts still cover it. Meanwhile, investors in Rite Aid, apparently concerned the company may be in need of cash, drove shares down 36 cents, or 10.2%, to $3.16.

Though Rite Aid has suffered from liquidity worries in the past, it wasn't clear that that problem drove the most recent filing. For her part, Datz wasn't aware of any specific cash-raising needs that prompted the selloff. "We wanted to monetize part of our investment in Drugstore.com," she says.

Indeed, worries over liquidity are probably overblown, says one analyst. After all, just last week Rite Aid -- which has been in the midst of a turnaround for the last couple of years -- reported a

strong fourth quarter and said its cash flow was better than expected.

"The company had a good report last Thursday, and I don't see any reason why it would be down on this news," says Dave Rodgers, who covers the company for McDonald Investments. "I don't think it's a liquidity problem." (He has a hold rating on the stock, and his firm does not have a banking relationship with Rite Aid.)

Still, it is understandable for investors to get jittery at the mere hint of problems. Rite Aid has had a history of liquidity problems and accounting irregularities. The company has faced civil and criminal inquiries stemming from allegations it manipulated earnings in 1997, 1998 and 1999.