reasons not to pay for Vonage stock

Posts: 111 · Vonage Forum Senior Joined: Jun 15, 2006 Posts: 111

While I am a lawyer who specializes in class action lawsuits (but not involved with any Vonage class actions), please do not consider this legal advice, just thoughts about what I would do in your situation.

First, it seems clear that many and perhaps all Vonage customers who bought the IPO are entitled to have their trade recinded. There are several legal reasons that have been raised:

They were solicited to buy without being given a prospectus or told how to get one, in violation of securities law;

They were unable to log onto their Smith Barney account online on the day of the IPO;

They were defrauded by Vonage management and underwriters;

Vonage management and underwriters were negligent.

You are all members of the class actions if you bought the IPO, though if you don't want to be you will be given an opportunity to "opt-out" of the class. Most class actions settle out of court.

However, I would make every effort not to pay, because this is not a normal class action.

Vonage loses an enormous amount of money each month. It has on hand right now, post IPO, about 14 months worth of cash to operate with. After paying for the shares to its underwriters of those who are unwilling to pay, as well as its legal bills, 12 months may be a more realistic estimate.

Losing money hand over fist is OK as long as you can raise more. Amazon lost tons of money for years before breaking even because it was always able to sell more stock to cover its losses.

It is increasingly clear now that Vonage will not be able to raise any more money to sell its stock. This creates a vicious cycle. There is no way the company can avoid bankruptcy without more money, as people realize this its stock price keeps falling, which then in turn futher confirms that it will never be able to raise more money. Vonage thus resembles eToys a lot more than Amazon.

You guys also ought to realize that it wasn't just you who were burned, but so were all of Vonage's bankers. Nobody will want to be associated with this company anymore.

Jeffrey Citron, the founder, Chairman of the Board, and largest shareholder of Vonage, in order to settle fraud charges brought by the SEC, agreed to pay a $22.5 million fine and was banned for life from the securities industry. Vonage's i-bankers took a big chance in dealing with this guy considering this bankground. They would be insane to do so again, and would be putting themselves at great legal risk.

Now back to why you should make every effort not to pay. First, as a moral matter, Vonage and its partners have tried to con you. I do not think you have any moral obligation to pay up for the worthless stock they conned you into agreeing to buy.

Second, I don't see how Smith Barney can go after you for payment since Vonage has agreed to pay for any shares you don't buy. Now Vonage can of course go after you, but the bad PR and the legal expenses of doing so are unlikely to be worth it.

In normal circumstances you might just pay Vonage and wait to get your money back from the lawsuit. However these suits take years to even reach settlement. In the meantime Vonage is likely to go bankrupt. So while you may "win" your money back a few years from now, there will be no way for you to collect on it.

Better to keep the money right now, and years from now when the suit finally is settled or won, have your right to do so confirmed.

Posts: 6 · New Forum Member Joined: Mar 10, 2005 Posts: 6

Good advise to a point. As far as I can see, people went into this IPO with their eyes open (or SHOULD have), thinking they were going to make a killing. I knew full well what the risks were and blame NO ONE for my loss. I was the one who bought the stock, Vonage never promised me anything. Really get tired of the whining! I lost over 2 grand in the last three days but thats the way it goes! As I said on another post, "Dont bet if you can't afford to loose".

Posts: 111 · Vonage Forum Senior Joined: Jun 15, 2006 Posts: 111

Thinking you were going to make money doesn't mean you deserved to be defrauded. Keep the money if you still have a chance and let the courts sort it all out.

Posts: 4 · New Forum Member Joined: May 23, 2006 Posts: 4

If this junk about Citron is and STILL is true, then the LLC governing this website that's supposedly "seperate" is probably being fed money by Vonage or Citron himself. DConnor (the forum admin) said he was buying more stock as it sank, his losses (if he hasn't sold yet) have to be in the 10s of thousands. So, he's either lying or really pissed right now. If that's the case he should turn this website into a hate Vonage website, but he won't because he's being fed money by Vonage or someone with ties to it.

Posts: 70 · Full Forum Member Joined: Nov 28, 2005 Posts: 70

backdraft wrote:

Good advise to a point. As far as I can see, people went into this IPO with their eyes open (or SHOULD have), thinking they were going to make a killing. I knew full well what the risks were and blame NO ONE for my loss. I was the one who bought the stock, Vonage never promised me anything. Really get tired of the whining! I lost over 2 grand in the last three days but thats the way it goes! As I said on another post, "Dont bet if you can't afford to loose".

Really!! I simply don't get it. I'd like to see how many people here would react to hearing 'Well, this is BS, I'm not gonna pay you' from someone who'd made a purchase/obtained a service.

My financial knowledge isn't exactly superior, but (and I'd posted this before) two things: IPO's have inherent risk, AND Vonage's IPO didn't exactly get glowing reviews from the biz community before its release.

Posts: 80 · Vonage Forum Senior Joined: May 24, 2006 Posts: 80

Based on your post, I find it very hard to believe that you are a lawyer specializing in class action lawsuits.

However, even if there are legal ways to wiggle your way out of paying, I think the only right course morally is to take responsibility for your own actions rather than try to find ways to blame your loss on others.

Posts: 111 · Vonage Forum Senior Joined: Jun 15, 2006 Posts: 111

A moral obligation to pay people who have swindled you, just because at some point you "signed on the bottom line"? Well we all have our own conceptions of morality, I think yours is a bit unusual.

You do not understand contract law, however, if you think you are legally obligated to pay a crook just because you signed a contract at some point.

The attacks here on the moderator are silly. We need more people who volunteer their time on Internet forums, not less.

Posts: 2251 · Posted: Mon Jun 19, 2006 12:45 pm Post subject:

BigTime wrote:

The attacks here on the moderator are silly. We need more people who volunteer their time on Internet forums, not less.

Thank you BigTime. I will not even address tfunk's comments other than to state that I am neither lying nor pissed.

Posts: 86 · Posted: Mon Jun 19, 2006 3:08 pm Post subject: Lawyers

I thought lawyers used spellchecker??

I guess not.

Posts: 33 · Vonage Forum Junior Joined: Jun 01, 2006 Posts: 33

And here is a great summary of what VG failed to disclose in the ir prospectus. After reading this, nobody would pay for the sotck and that explains why its down over 10% today.

http://blogs.zdnet.com/ip-telephony/?p=1143