Now, Vonage Says Customers Still Have To Pay Up For Shares

from the not-so-fast dept

With its stock price tanking following its IPO, the news that made the rounds yesterday that Vonage indemnified its underwriters and would cover the cost of shares allocated to customers who now don't want to pay up led to speculation that they'd be let off the hook. However, Vonage has moved to make it clear that isn't the case, and that it expects everyone who was allocated shares to pay up. This is certain to cause them a few problems, both from customers who want to get out of their obligation because of the falling stock price, as well as those alleging problems in the allocation of shares and ended up with shares when they thought they were receiving none. Vonage's IPO has been a financial mess, but the real fallout will be in the lingering damage it does, both to the company's balance sheet and to its reputation with customers.

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  1. identicon
    James Krawczyk, 1 Jun 2006 @ 9:14am

    Effect on customers

    Vonage sent notices to certain eligible customers that they could get in on the IPO. They used a system where you can bid on a price range, and if the stock was offered within that range, you were obilgated to buy the shares.

    But what has happened is that after the IPO, the share price started falling. Vonage is now telling all those people who bidded on that range to pay up, even though they are basically paying more to Vonage for the stock than it's worth on the market.

    Naturally, those people are upset about having to do that, but regardless of the system used, that's the nature of an IPO. Sometimes really good, sometimes really bad.

    In my opinion, your average Vonage customer shouldn't feel the effects for now. The negative fallout from the situation will almost definitely make lots of the people involved dislike Vonage. It could lead to larger financial problems, which could, in turn, then effect the service (bankruptcy, raised prices, etc.).

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