Vonage: More IPO Pain

The after-math of Vonage's IPO has taken a new and strange twist amid a report in the New York Times that Vonage is willing to reimburse underwriters who take a financial hit if Vonage customers refuse to pay for shares allocated to them. While a deal is supposed to be a deal, some of the 10,000 Vonage customers who enthusiastically bought into the IPO can't be happy that Vonage shares have tumbled more than 25% from their issue price of $17 a share. I guess it's a nice, low-cost goodwill gesture by Vonage to cover the costs of the brokerage firms that could be left holding the bag if investors balk at coughing up for their shares but it demonstrates just how badly the IPO came off – as well as putting the spotlight on who actually invested in the IPO and why. Can anyone explain to me why Vonage was able to raise more than $500-million despite the fact its balance sheet is awash in red ink and it competes in a competitive market with low barriers to entry? For more insight, check out Michael Urlocker, Silicon Valley This Morning and IP Democracy.

Update:  Vonage now claims it does not plan to buy back shares allocated to customers who want to renege on their stock purchases following the stock's tumble over the past week. In a statement, Vonage said its 10,000 customers who bought shares are "obligated to purchase their share allocation from the underwriters".