Vonage's Troubles Keep Piling Higher And Higher
from the not-the-company's-finest-moment dept
It’s not like there weren’t plenty of news and analyst reports prior to Vonage’s IPO talking about how weak the financials looked for the company. Hell, even before they filed to go public, there were serious questions about the financial viability of the company. It was clear that they were spending a ton on each customer and they faced an awful lot of competition. Yet, once Vonage realized institutional buyers weren’t so interested in the stock, they turned to their own customers, sending them a pre-IPO spam about “sharing their success” with their customers — which was really shorthand for filling in the lack of much needed institutional investors with suckers who think that just because they like their cheap phone service the company is a good investment. Of course, even then, the company bungled the offering, making many customers think they weren’t allocated shares when they really were. This upset customers who claimed they didn’t know they’d been granted shares, and who would have sold before the stock tanked (as it has done consistently since the IPO).
Now, with its first earnings report as a public company the situation looks even worse in almost every way. Marketing costs have continued to increase. Competition has continued to increase (and Vonage’s response to the threat of cable VoIP players doesn’t inspire much confidence). Customer churn has also increased — perhaps, in part, due to the way they bungled the IPO for their customers (maybe falling back on those customers to fill in the gaps wasn’t such a good idea after all). Oh yeah, it also appears many of those customer/shareholders still haven’t paid for the stock. And, on top of all of that, it seems that those customers they roped into the IPO weren’t even enough to fill for the missing institutional investors. Vonage ended up having to buy nearly $12 million of its own stock to meet its IPO obligations. This IPO has shaped up to be nothing short of a colossal failure for the company. It had been rumored all along that the IPO plans were really a bluff to get someone like BellSouth or Sprint to buy them out — but the telcos called that bluff and they’re probably happy they did.