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.

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  1. identicon
    Eric N., 2 Jun 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.

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