(Updated)
I had already called the Vonage IPO a dud prior to receiving this email:
“Because much of our success is attributable to our customers, we have asked the underwriters of the IPO to reserve shares of common stock for sale to certain Vonage customers at the IPO price in a Directed Share Program.
You may be eligible to participate in the Directed Share Program if you meet certain eligibility requirements, including having been a Vonage customer from December 15, 2005 through February 1, 2006.”
So Vonage is offering it’s IPO shares to all their customers. I can’t help but see the similarity to WR. Hambrecht’s OpenIPO in the bubble years: little guys like me would never get an allocation in any of the juicy IPO’s, but we got all the duds the brokerage was trying to dump. D
I, too, am a happy Vonage customer. So when I received the invitation to participate in its IPO, it made me curious. But after reading about the background of Jeffrey A. Citron (Vonage’s “principal stockholder, founder, Chairman and Chief Strategist” and former CEO) and his run ins with the law, it made me nervous. More importantly, I decided not to participate in the IPO. You can read all the juicy details here:
http://www.sec.gov/cgi-bin/browse-edgar?company=vonage&CIK=&filenum=&State=&SIC=&owner=include&action=getcompany
In my opinion, this clearly is an individual who puts his own interests first – above those of his shareholders or customers. Given the increased competition in VOIP from the big players (AT&T, Verizon, etc.), I think the IPO is a desperate attempt by Vonage execs to cash out before the competition beats them down, especially since it was reported that Vonage is now allocating 15% of IPO shares to its customers. In the really hot IPOs, do the customers ever get to participate to such an extent?
After the IPO, Citron will own approximate 31% of Vonage. If its shares are priced at $14 – $16 dollars (as the company hopes it will be), then Citron will hold Vonage shares worth approximately $775 – $872 MILLION! And you don’t think he’s trying to cash out?!?
I’ve been a customer since the beginning, and they couldn’t allocate me even 100 Shares. I’m thinking about switching services. My offer of 100 shares through the Direct IPO was not fullfilled. I guess the demand is really strong. I feel short-changed. I’m still hoping this is a system glitch!
Adam, you’ll be happy not to have received an allocation:-) This is a dud. As with all IPO’s the market can go crazy, and pump it up for a while.. but this is not Google, it’s a mature business already being commoditized, not sustainable.
I feel bad for the post-IPO retail investors…
A lot of people felt like you last night…
Even those who wanted the 5000 share allocation had to “settle” for 1300 shares and were upset about that.
Of course, after todays action this all turned out to be a blessing in disguise…
Zoli,
While I think Henry is right in pointing out the damage this will likely cause to Vonage relative to customer relations; I’m certainly not going to offer sympathy to those who indicated for shares of the IPO.
Caveat Emptor applies…these very same customers who indicated for IPO shares did so hoping for a quick flip in most cases. The notion that they didn’t do much fundamental research into Vonage’s prospects and valuation is all the more reason why they should’ve treated the “offer” to participate in the IPO with great skepticism.
Many of these same customers would never think to self-diagnose intense stomach pain, or replace their own roof, or rebuild their own transmission…they would seek the advice and counsel of experts (doctor, carpenter, mechanic respectively). Why these people didn’t seek counsel from financial professionals this time out is beyond me…
Jason
Dropping 25% in two days is bad enough, but now it seems that some investors were actually told they had been allocated 0 shares, just to find out after the drop that they got shares after all: Vonage Allocating Shares After The Fact?