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
    Robert E Spivack, 3 Jun 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?

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