Wall Street

by Carlo Longino

Another Day, Another Angle To Vonage's Bungled IPO

from the i-p-oops dept

Every day seems to bring yet another tale of ineptitude from Vonage's horrifically performing and poorly executed IPO. It began with reports of bugs in the share allocation process and then went to a flip-flop on whether or not disappointed customers would actually have to pay for the shares they'd committed to purchase, but it's a little older issue that's the source of the latest story. Vonage got dinged for a technical violation when it solicited its customers with an offer to get in on the IPO, and the company now says those errors could make the sale an illegal offering, allowing buyers to claim damages or get the company to buy back their shares. The company claims it has a strong defense against such charges, but it's inevitable that this whole thing is going to end up in court -- assuming the naysayers aren't right and Vonage can stay in business that long. This IPO has pretty much been a mess from top to bottom, and it's a fair question to wonder how much good it's ultimately going to do the company.

Reader Comments (rss)

(Flattened / Threaded)

  1. identicon
    Anonymous Coward, Jun 2nd, 2006 @ 11:49am

    Good for the company? Do you really think the management cares about that?

    The IPO was a way for the investors to cash out, they couldn't find anyone to buy them, so they did this. How much money do you think Citron got out of this IPO? He already paid a $22 million dollar fine to the SEC, whats another few million in fines? He got his. Same for all of the other big investors.

    reply to this | link to this | view in thread ]

  2. identicon
    eric, Jun 2nd, 2006 @ 12:06pm

    soon to be


    reply to this | link to this | view in thread ]

  3. identicon
    DittoBox, Jun 2nd, 2006 @ 12:16pm

    Re: soon to be

    Haha...good one!

    reply to this | link to this | view in thread ]

  4. identicon
    JerseyRich, Jun 2nd, 2006 @ 12:35pm

    Vonage has a great product, a great website, impeccable service, and very low prices. I have been a customer going on 9 months. My phone bill is less than $20 a month.

    I hope they survive because Comcast offers the same service for $39.99.

    reply to this | link to this | view in thread ]

  5. identicon
    webmanga, Jun 2nd, 2006 @ 12:42pm

    I will not go to VOIP until it hits half the price of my local bill. I pay $26.00 a month ...for nothing service but don't feel comfortable with the VOIP platform yet. If Charter could keep my internet up when it rained I may think about it.....Charter sucks....

    reply to this | link to this | view in thread ]

  6. identicon
    DSL?, Jun 2nd, 2006 @ 12:54pm

    webmanga you must use DSL
    because my verizon DSL craps out on me when it rains.

    Vonage, I say the stock is not worth a dime. The company has never been profitable. Its lost money every year since its inception. close to $600 mil total..

    reply to this | link to this | view in thread ]

  7. identicon
    Thomas, Jun 2nd, 2006 @ 1:11pm


    I was a customer, but 1 month after the warranty expired on my equipment, I could no longer connect to them. I called their tech support, who had me re-start my cable modem and vonage box, when that didn't work, he told me my equipment was ouot of warranty, and if I would like, he would ship me another one at full price, plus shipping. I opted to drop them in favor of sunrocket, who even give you 2 free cordless phones. I had a minor problem setting up their equipment, but their tech support staff was fantastic and very honest.(the problem was an issue on their end.)

    reply to this | link to this | view in thread ]

  8. identicon
    Nyle, Jun 2nd, 2006 @ 1:12pm


    I pay $15 a month to Vonage for 500 anywhere minutes and all the other perks like Voicemail, caller id, etc. That's almost have your vill. Assuming your nothing service means you use less than 500 minutes a month. You actually have to use something like 700 minutes a month to justify the unlimited plan. Otherwise, it's cheaper to do the $15 plan and pay for any minutes over the 500.

    I've been with Vonage for like 2 years now and have been very happy. Of course I've never needed to contact them for anything because it just works for me.

    reply to this | link to this | view in thread ]

  9. identicon
    Anonymous Coward, Jun 2nd, 2006 @ 1:14pm

    webmanga and anonymous,

    Your inline filter is cracked and full of water. This has been an issue with DSL from day one. If you had called them out instead of bitching online, your problems would have been solved years ago. You have to let a company know of the problems you are having in order for them to fix it.

    /not an telco employee, but have friends who are line techs

    reply to this | link to this | view in thread ]

  10. identicon
    ZA, Jun 2nd, 2006 @ 1:38pm


    I have been a Vonage Customer for over 2 years. I love the service. The only problem I had was that it took too long to port my home phone number over. They did credit me back the additional month and I was satisfied. My original Motorola modem went bad and they sent me a Linksys at no charge and I haven't had a problem with them since.

    I am happy with Vonage service and have signed up a lot of others as well.

    I would imagine that someone would purchase them if puch came to shove.

    I sure hope they dion't go Gonage!

    reply to this | link to this | view in thread ]

  11. identicon
    Mike, Jun 2nd, 2006 @ 1:38pm

    I used Vonage for a while and had two adapters completely fail. Their tech support was awful, and customer support was nearly non-existent. I dropped them for about a year and after moving decided to use them again. I was totally shocked by the level of service - it is great! Tech support is easy to deal with, and when you call for customer service you have someone pick up in less than a minute. I am very impressed. The quality of service has been fine for me. I too am using the 500 min plan for $15, and really enjoy all the bells and whistles. I am concerned about the IPO, though - this sounds thoroughly bungled. I almost bought into it since I have really like the service - but am glad I didn't!

    reply to this | link to this | view in thread ]

  12. identicon
    Kevin, Jun 2nd, 2006 @ 1:39pm


    I don't know why so many people think Vonage will fail. I have had Vonage for almost a year and I love it. I told a few friends about it, they switched and now they love it too. I really like all the features you get that my last phone company would charge an arm and a leg for.

    reply to this | link to this | view in thread ]

  13. identicon
    ZA, Jun 2nd, 2006 @ 1:44pm


    Verizon DSL sucks. I had it for a month and told them to come and get their junk out of my house. It never worked between the hours of 5pm and 10pm.

    I have been an Adelphia Powerlink subscriber since they came out with the service about 7 or 8 years ago (with the exception of the brief attempt to save money with Verizon). Just remember, you get what you pay for with your Internet connection and for VoIP, you MUST have a reliable connection.

    reply to this | link to this | view in thread ]

  14. identicon
    Denfro Licious, Jun 2nd, 2006 @ 2:58pm


    Had a problem with Verizon DSL as well. Whenever the street lights went on my DSL went off. They couldn't do anything about it. But I have since moved and now have no problems.

    Vonage is great, and plenty of features.

    reply to this | link to this | view in thread ]

  15. identicon
    Javarod, Jun 2nd, 2006 @ 3:05pm

    Verizon DSL

    I had Verizon with no problems back in Asbury Park NJ (damn that was years ago), but then again, I was literally ten blocks from the CO.

    reply to this | link to this | view in thread ]

  16. identicon
    R.Mnrd, Jun 2nd, 2006 @ 3:10pm

    Good Product

    Been using Vonage for about a year an a half... The service has been excellent. Never any problems with them other than on my own side (failing cable modem). I'd like to see them succeed. I know they haven't made money yet but their product is great, you just can beat the price.

    I tried going cell phone only for a few months but the money I would have had to spend to bump up my minutes would have actually cost more than to keep the cheaper phone plan and vonage.

    reply to this | link to this | view in thread ]

  17. identicon
    Eric N., Jun 2nd, 2006 @ 4:30pm

    ive had vonage almost from the beginning of their existence. never had a problem with their service; albiet, ive never called their customer service and technical support departments, which their prospectus even said were suffering due to a high level of growth.

    while, the audience may or may not have investors here, and I was ever so close to buying shares myself (thankfully I did not), but consider this: the underwriters of the deal did their job and did it well. as someone above said, the original investors wanted to "cash out." Half of that is true. First, imagine if you were vonage management, the stock is priced at $17.00/share, you get approx 500 million in capitalization for expansion growth and the stock shots up to 34.00/share on the first day. That would, in my opinion, show that the underwriters did not do their job. (evidenced by the fact that vonage could have received an additional 500 million in capitalization). Whereas, with a reduction of price per share, while upset for investors, isn't such a bad situation for management and the original investors. Most are locked in to their shares and aren't even eligible to sell their shares for a year. It is in their best interest to increase the value of the company over the long-term, and at the same time.

    Was 17.00 a share worth the investment? Well, the market says no. But 12 a share? I may buy now, VOIP is here to stay, so the only risk in buying now, is that vonage is acquired in the next 6-12 months before management can really capitilze on the new cash from the IPO. I somewhat doubt management will entertain such an acquisition; and if they do, then we can assume that they are bleeding bad and their only alternative is to sell themselves and cut their losses.

    reply to this | link to this | view in thread ]

  18. identicon
    Anonymous Coward, Jun 2nd, 2006 @ 6:19pm

    Re: Similar

    Denfro, did you move to a street with no streetlights?

    reply to this | link to this | view in thread ]

  19. identicon
    Inpsector Gadget, Jun 3rd, 2006 @ 5:47am

    Vonage Shills

    Notice that the glowing comments for Vonage all get posted within a minute or two of each other under different names? Seem suspect?

    I used their service for about 9 months with no hassle. Then I added a second line and everything went to hell. Their customer service is very difficult to communicate with and incompetent. Teir 2 tech support was good and helpful but took forever on hold to get to, and I had to go through the moronic customer service people first. One time I was "honored" with a call from a Teir 3 support person who didn't even know what the problem was.

    These guys suck, big time. This has all transpired within the last two months, so anyone posting that right now their customer service and tech support is great is clearly lying, probably a company shill trying to save their image everywhere they can. If you don't believe me, call their 800 number and follow the instructions as if you are an existing customer with a problem. Of course if you're a new customer you get connected right away.

    Boneage is good, but Goneage is even better. The product has potential, they just can't deliver. If they would spend the IPO money to fix that, they probably could get rich, but instead the story is that it's all going into an ad campaign, which means they'll be gone within 18 months, probably acquired.

    reply to this | link to this | view in thread ]

  20. identicon
    m, Jun 3rd, 2006 @ 7:07am

    Vonage is great. Look at the features you get for the price and the customer service is good as well. There should be a class action suit against attorneys taking on frivolous class action lawsuits. Everybody looses except the lawers.

    reply to this | link to this | view in thread ]

  21. identicon
    Robert E Spivack, Jun 3rd, 2006 @ 11:37am

    What about the "underwriters"?

    One thing I don't see anywhere is a discussion about the underwriters responsbility.

    These investment bankers earn big fees to do their job, yet on the rare occassion like this when they screwed up, I don't see them standing-up to shoulder their responsibility.

    investopeida.com (http://www.investopedia.com/terms/u/underwriting.asp) says underwriters "new issues are usually brought to market by an underwriting syndicate in which each firm takes the responsibility (and risk) of selling its specific allotment. "

    The underwriters are instrumental in setting the final strike price of the IPO. They bear the responsibility for cashing out the insiders while leaving the public with a very overpriced IPO.

    Why should Vonage agree to pay the underwriter's for any stock investor's reneg on buying? Isn't that the nature of the underwriting risk for which these banks get those huge fees in the first place?

    reply to this | link to this | view in thread ]

  22. identicon
    Louie, Jun 3rd, 2006 @ 12:10pm

    Damage to Vonage?

    How can Vonage be damaged any more than it is? No plans to ever be profitable. A leader banned from securities activities for life. A product that stinks. Misleading marketing. Misleading securities execution.

    When is everyone going to wake up and realize that Vonage is working the lowest common denominator of human nature - GREED? Face it. You're not going to get free phone service that works very well. You're not going to make a fortune on an IPO. You really aren't going to get "something for nothing"...not even screwed.

    reply to this | link to this | view in thread ]

  23. identicon
    Mark, Jun 5th, 2006 @ 5:30am


    no one from mgt sold in the IPO, although their cost basis is under $4.

    reply to this | link to this | view in thread ]

  24. identicon
    mkam, Jun 5th, 2006 @ 7:06am


    Agree. My DSL from Verizon has been constantly up for 2 years straight, even when my cable has been out. The only time I have lost them is when the power goes out (about 30 min total in 2 years) and it is hard to use the internet anyway when my computer won't turn on.

    Verizon DSL is overpriced and not really fast but my uptime has been superior. Maybe it isn't the same everywhere?

    **Definately not a telco employee and if I had more choices between comcast and verizon for internet I would be happy.**

    reply to this | link to this | view in thread ]

  25. identicon
    Chris, Jun 5th, 2006 @ 9:16am

    No problems here

    I've used Vonage for my office and home and couldn't be happier. I've had the business line, with fax, for over 2 years. I've had one problem in all that time, and I caused it (issue with the adapter when I changed the IP address on my computer from dynamic to static, but tech support set me straight in about 5 minutes (config problem on the Motorola). I have nothing but good things to say about them, and am constantly recommending them to friends.

    reply to this | link to this | view in thread ]

  26. identicon
    Josh, Jun 19th, 2006 @ 9:33am

    I have had Vonage for about a year now and have had no problems that were their fault. I pay $28/mo with tax and my wife can call Europe and talk all day to her family for nothing beyond base price! That, my friend is a deal when I used to have to pay about $100/month in LD charges.

    reply to this | link to this | view in thread ]

  27. identicon
    MO, Aug 18th, 2006 @ 11:56am

    Verizon DSL sucks in my area as well... I am currently renting a room from my landlord and she just switched from Adelphia cable to Verizon. Ever since the switch I lhave been living in a jungle when I go home - no cable no internet, what the heck would I do in my room? However, Verizon DSL does work during the day time (when I am at work).

    It is interesting to hear other people are having the same problem as I do. I pay my rent including internet service, and I feel really bad to talk to my landlord about crediting some rent money back just because she got cheated by Verizon's ADs; she's a really nice lady.

    reply to this | link to this | view in thread ]

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