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Vonage Vonage to IPO buyers: Pay up
Stock price down 30% in a week
Posted by the Asbury
Vonage to IPO buyers: Pay up
Stock price down 30% in a week
Posted by the Asbury Park Press on 06/1/06
BY DAVID P. WILLIS
BUSINESS WRITER
HOLMDEL — Since Vonage Holdings Corp.'s initial public offering of stock last week, shares have tanked, dropping nearly 30 percent.
And now, according to reports, some Vonage customers are having second thoughts about following through and paying for shares they agreed to purchase at the IPO price.
Not so fast, Vonage said Wednesday.
"Customers are obligated to pay for their shares if they were allocated shares in the Vonage Directed Shares program," spokeswoman Brooke Schulz said. "We're not buying back shares."
Underwriters set aside 13.5 percent of last week's $531 million IPO for customers at the offering price of $17 per share. But shortly after trading began on May 24, shares fell, dropping to $14.85 the first day. The stock closed at $12.02 Wednesday, down 48 cents.
No one is saying how many customers who received IPO shares have refused to pay for them.
"If the customer that was allocated shares chooses not to pay, they are taking a risk because we are reserving our right against them to pursue payment," Schulz said.
Vonage's position on Wednesday seemed different than the one it took earlier in the week.
In a statement to CNBC earlier, Vonage said that while all options are open, it did not want to alienate customers. If certain customers who took part in the company's Directed Share Program "don't pay, we expect to repurchase shares from the underwriters if necessary," it said. The statement was reported on a CNBC Internet blog.
The company made a similar statement in a U.S. Securities and Exchange Commission filing before the IPO. Vonage said it has "agreed to indemnify the underwriters" from costs if customers refuse to pay for their shares.
Based in Holmdel, Vonage provides local and long-distance telephone service over the Internet using a technology called Voice over Internet Protocol, or Voip. The technology gives customers who have a high-speed Internet connection a less expensive way to make telephone calls.
Vonage customer Steven Queroli of Middletown, who purchased 1,250 shares at the IPO price, said he has not yet paid for them.
"In general, I would send my money in," Queroli said. "There was an agreement that I would do that. I accepted that risk."
In an online forum at vonage-forum.com, investors posted angry comments about the IPO. Some criticized underwriters for not pricing it properly.
"Just ordered a stop-payment online with my bank for the check I wrote to Smith-Barney," said one poster going by the name of "bigtuna." "Hope my bank catches it in time."
"This is no way to thank your customers," wrote a poster who had the moniker "dnyc." "Now they are compounding my anger by offering to indemnify those that do not pay for their shares and buying back from the underwriters."
In an interview Wednesday, Scott Rothbort, a professor of finance at Seton Hall University, said Vonage has to win investor confidence.
"The company has zero credibility right now," said Rothbort, who is president of Lakeview Asset Management LLC in Millburn. "Now the question is, can Vonage deliver after they basically fumbled the IPO."
Read The Full Thread: Vonage to IPO buyers: Pay up
• Got this e-mail from Vonage Investor Relations this morning...
• I have paid for my 1300 shares, and sold the first day at a loss of about 1.5 points
• Welcome to another trading day fellow investors. Looks like another day of free
• Have to see where vonage is trading after 30 days (you have to wait 30 days after
• This topic is being discussed HERE
Marquee posted "Vonage to IPO buyers: Pay up
Stock price down 30% in a week
Posted by the Asbury" on 06/01/2006 |
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