Archives for June 2006

(Updated)
I can’t believe this madness… everyone crying foul, provocative titles like Vonage not giving customers a break create a feeling that somehow Vonage screwed (pardon my French) their customers and somehow should compensate them. That’s Nonsense!

Now, let me just say I called the Vonage IPO a dud several times, first based on fundamentals, then the last straw being the customer-solicitation, that was as bearish an indicator as it gets.

But that has nothing to do with the fact that customers who bought the shares are responsible for their own decision, and can’t expect to be bailed out after the fact. I certainly agree with Jason, Caveat Emptor still applies. The stock market is not for everyone. Jason goes on saying everyone had access to the company’s S-1 filing – well, not everyone can interpret those documents, but in this case there really was no need: all one had to do was do a simple search on Vonage IPO and there was a barrage of highly sceptical articles in plain everyday language. It really must have been difficult not to see any of these warnings. But none if that matters; customer-investors made their own decision and are responsible for it. If they went to Vegas and lost thousands a night, they would not claim their money back, either.

So let’s get some facts straight:

• Vonage is a technology innovator, they pioneered the VOIP market.
• They had a chance for an IPO 1.5-2 years ago. Yes, I know the overall market was not favorable, but back then they were the VOIP industry, they had to expect competitors to rain on their parade sooner or later
• The VOIP market is now being commoditized, they will become a marginal player. Thank you, Vonage, for bringing us this technology, you’ve done your job, now you can go.
• Stock trading is dangerous to one’s health, the IPO market especially. It’s the Big Boy’s game, little guys get scr***d.
• Availability of pre-IPO allocation to retail investors is a fool-proof sign that the stock will tank.

On a personal note, I am not pretending to be particularly smart here, I paid heavy tuition when I was stupid enough to actively trade in 1997. In fact back then I seriously considered writing an anti-daytrading book – had blogging been available, it would have been so much easier…

Update (6/2): Jason brought up a really interesting point in his comment below: “Let’s say the average customer lost $300-$400 on the IPO (i.e., they got 100 share allocation), and that’s got them angry enough to leave Vonage? Hmmmm…sure doesn’t sound like Vonage is providing a service that customers can’t get elsewhere, does it?”

It sure doesn’t , Jason. Now, I’ll be the contrarian again . Just like Vonage’s poor business performance had nothing to do with the fact that investors need to pay up, I don’t think their loss should be linked to continued use of service. Of course it will be, since we tend to be emotional, but c’mon people, let’s learn to make rational, not emotional decisions.
You should judge the usefulness of Vonage service on it’s own merits, and that of the competitors, not on whether you lost money on the stock or not.

The real bad sign for Vonage is that even on it’s own merits I find less and less reason to maintain service. It was great while it lasted, but I barely use my phone now, Skype or VoipStunt is so much more convenient to use. That’s what Vonage should be worried about… not that they can do much about it.
Of course, for Jeffrey Citron Apr