The Incredible, Inflatable Drugstore.com

Jun 28 2001

Remember PlanetRx? Soma.com? The multitudes of vitamin vendors? It seems the only online health store anyone hears about anymore is Drugstore.com, and the news isn't always good. Now it seems the Drugstore.com IPO might not have been as healthy as it looked.

The Seattle Times got right to the point, explaining that "a high-profile securities law firm" has accused the 1999 IPO of being "rigged." Times reporter Drew DeSilver threw in some stock lingo, too: Buying at the IPO price while promising to buy more at the higher, post-IPO price is called "laddering," and it artificially inflates the stock. The lawsuit against Drugstore.com claims that the three brokerages managing the IPO did just that, though the brokerages aren't the defendants. The suit does name some familiar faces from the board of directors, such as Jeff Bezos and Howard Schultz . Make mine a double-tall lawsuit, to go.

The E-Commerce Times tried to figure out why online drugstores aren't working. Columnist Paul Greenberg cited competition from individual drug companies' sites but didn't mention U.S. online pharmacies' complicated, costly and mandatory relationship with HMOs' pharmacy benefit managers. His dramatic conclusion: People would rather use a local, bricks-and-mortar drugstore and talk to a human pharmacist. Well, that explains everything.

Suit alleges drugstore.com stock offering was rigged
Seattle Times

Holder Suit Alleges Underwriters Manipulated Drugstore.com's IPO
The Wall Street Journal

Internet Drugstores Need a New Prescription
NewsFactor.com