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May 24, 2006

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» Vonage - OpenIPO? from Zoli's Blog
(Updated)I had already called the Vonage IPO a dud prior to receiving this email: "Because much of our success is attributable to our custom... [Read More]

» Vonage Customers hurt by IPO allocation?...I'm going to need a very small violin from The Ponderings of Woodrow
The world is abuzz with Vonage's IPO debacle. While I won't comment on the merits of the deal, I did want to highlight something Henry Blodget said on his blog: I don't mean to jump on the sick-horse-kicking bandwagon, but [Read More]

Comments

TheShadow

I am Vonage customer - and the only reason I haven't terminated the service yet is that I have been too busy with other affairs.

From http://www.ripoffreport.com you will find numerous reports that mirror my own experience with the quality of their service - and their call center customer service [or lack thereof]

If I could have bought PUT options on this piece of shit this morning - I would have done so.

King Troll

Well it's about fucking time bro. Why no updates in so long. Every fucking hour im on here waiting to read something new but theres nothing. Fuck bro youre going to force me to star reading Jim Kramer's shit because at least he UPDATES.

Update more often so I can read something ASSHOLE.

oh and SECOND!

Chief Optimizer

I just cancelled my Vonage service, switched to Comcast VOIP. The upstream static was just unbearable on Vonage.

It took over 1 1/2 hours of waiting on hold on two separate calls to get these jokers to actually answer the phone. I actually cancelled the service b/c of their absolutely atrocious customer service.

On a number of occassions I could not get vital overseas connections to work. I called Vonage customer service line which routed me to some offshore script reader, who would have to type in a trouble ticket and "get back to me." Needless to say, it never got resolved and I voted with my feet.

I am not suprised by the outcome of the IPO. This one is going lower. Just wait until the ISP's start routing the VOIP protocol to the slow lane - at that point Vonage is dead in the water.

Recommendation: SHORT

john

just to be cynical.
wouldn't vonage customer who bought vonage stock try to stay on as a vonage customer ?
if they cancel their vonage account, then their stock would probably lose more value as vonage will generate less income.
thus, they may try to stay on until their stock regain some value.

Deathstar

Cross your T's and dot your I's. Vonage should be asked to repurchase customers shares at IPO price.

Vonage disclosed that aspects of its Vonage Customer Directed Share Program, which allows some Vonage customers to buy I.P.O. shares, may have violated securities rules. Specifically, an initial e-mail that Vonage sent to customers about the program was missing the required link to Vonage’s I.P.O. prospectus.

It was a relatively minor flub, but the oversight shows how easy it is for nontraditional I.P.O. methods to run afoul of the existing rules. Vonage flagged this potential violation, as well as a similar one related to a voicemail message, in an amended version of its prospectus filed on Tuesday.

Here is the passage that Vonage added to its prospectus:

As a result, it is possible that the e-mail communication and the first page of the Web site could be determined to be an illegal offer in violation of Section 5 of the Securities Act, in which case recipients could seek to recover damages or seek to require us to repurchase their shares at the IPO price.

sonicjuice

Nice to hear from you again Henry! Missed your insight!

Why the delay between posts? There's been plenty to talk about (MySpace and how they may leverage/change the search space being one I'm particularly interested in)

Bruce L

My guess is that Vonage will lose customers that are not accustomed to the ups and downs of investing- hence the anecdotal account of the angry investor who wasn't able to quickly flip the stock at a profit. I would also think most serious investors are aware of the risks and as an investor (not in Vonage) myself, it's hard for me to equate dumping a service because I lost money on investing in the service.

That said, I have heard good things about Vonage, but it seems like the overwhelming opinion on this forum is negative. Good to note.

Bill Brown

I don't know why anyone would have bought Vonage on sound investing principles alone: 1) its product is a commodity that any cable or phone company could (and will) offer and 2) it's losing money hand over fist in trying to acquire customers—admittedly, that's it's only hope and it would be worth it were it not for point 1.

Brooklyn

Anyone who has been in the telco space knows that the IPO was all about the original investors getting their money back and pushing the problems off on to market. Congrats to them as they have succeeded.

Shorting of this stock is the ONLY way to make money.

The big question is how fast will this run down to $5 a share.

Jason Wood

While I think it's noteworthy to point out customers dismay, this is a classic case of Caveat Emptor. To hear Vonage customers play that "woe is me" card as if Vonage forced them to indicate interest in IPOs shares is a tough pill to swallow. If they're interests were merely driven on the hope of a "quick flip" then it's absolutely no different than losing $$$$ at the casino tables. These folks wouldn't be blaming the casinoes in that instance, they would be blaming themselves.

And to those who indicated interest with an eye toward being a long-term shareholder, I would ask them to remember that they wouldn't self-diagnose intense abdominal pain (they would see a doctor), most wouldn't replace their own brake pads (they would take their car to a mechanic), so why would they put their long-term financial capital to work without consulting a professional?

Jake Ludington

The fact that the guy cited above in the update was trying to make a quick buck on a rising IPO and bailed when his stock was down a few bucks speaks volumes to the stupidity of people who are putting their money in stocks these days. A segment of savvy investors may jump in and out of stock positions in "market timing" efforts, but most of the investors who buy into a company jump in with the intent to stick around because they fundamentally believe in what the management team will do with the company.

Equating the stock falling 15% with paying more for the service is equally naive. Do you buy Wal-Mart stock and then assume you doubled your cost for toilet paper doubled if the stock drops 50-cents per share?

The stock offering was a smart customer retention strategy from a marketing point of view. The customers who didn't invest to make a fast buck will hang on because they'll emotionally equate having the Vonage service with helping bring their investment back to the IPO level or above. And will possibly encourage evangelizing to friends and family. This doesn't mean they made a smart investment move, but in most cases, the novice investor is better off buying an index fund and relying on the market to be smarter than they are.

Henry Blodget

Not just the novice investor... Almost ALL investors are better off buying index funds.

EJohns

I participated in the customer share allocation. I thought there was a reasonable chance that the stock would be a decent investment but my appetite for taking a loss was pretty low so I sold and cut my losses. My bad for taking the risk and believing that the offering had a chance – but it is Vonage’s and the underwriters bad for handling the offering so poorly.

I agree that the results of the customer share purchase offer is going to be hard for a lot of Vonage customers like myslef to swallow. The nagative PR may also impact Vonage's ability to sign new customers. Vonage is going to have a pretty big mess to address.

Ben Marklein

Sold my 200 shares at a loss today. I knew the company was doomed in the long run, but thought I'd take a chance on a first-day pop. Oh well. My response to this was to register dumpvonage.com and throw up a page with affiliate links to some competitors. Maybe I'll make a couple bucks back on my investment :-)

Jeff

I, too, bought into the Vonage IPO hoping to make a quik buck. Damn stupid of me, but I don't feel misled or ripped off. The Vonage prospectus, which I didn't bother to read because I assumed it wouldn't tell me anything new, was full of red flags. The most glaring? That their Chairman has such a checkered past that institutions would most likely shun the offering. Also troubling, Vonage sells what is arguably already free and therefore the company needs to compete on quality. As a Vonage customer, I speak from experience when I say their quality is bad.

stocksandbombs.typepad.com

Joe

I had wanted to invest in the vonage IPO, however I did not have an extra $1600-$1800 availbile on short noticethat I could put in the stock market. If it a little longer I could have sold part of another investment and be assured I had that money and in hand in order to pay for the vonage stock.

Byron Raum

People who got in to the IPO trying to make a quick profit pretty much got what they deserved. I am a satisfied Vonage customer; have been for about 5 years. I decided it was unwise to buy the shares, and passed. If I had been in a gambling mood, I might have played the IPO, but if I lost money, it would be my fault, not Vonage's. Vonage did not promise people a particular stock price, all they offered was to sell them stock. Assuming that these people are adults, they are responsible for their own decisions.

Michael Urlocker

Vonage looks disruptive if you compare it to mainstream telcos: lower price, new business model, no legacy network, new features.

But we graded Vonage using our Disruption Scorecard and it fell short, earning a 'C' rating.

Why:
Vonage is not creating a new market
Business model looks like a dotcom (high growth now, worry about profits later) and it isnt standing on its own unique attributes.

Check out the full Disruption Scorecard.

www.OnDisruption.com

Neal Lachman

Henry,

"Not just the novice investor... Almost ALL investors are better off buying index funds."

That is not true. Most investors have a special interest in certain stocks. With a special interest investment comes the all-known risk and reward paradigm. It could be saver to invest in Index Funds or mutual funds, but the rewards are less than with individual stock.

Kevin Gibbons

I'm always willing to take my losses gracefully but the way the customer allocations were handled was not good for anyone, especially naive customers (non investors) who got burned and didn't feel they were kept notified properly. There is already a class action suit being filed with Berger and Montague. One of many I'm sure.

Dugen

This POS stock is going to ZERO. All the ex-AOL rejects are running their marketing department over there. They don't even create ECONOMIC VALUE or POSITIVE CASH FLOW PER SUBSCRIBER. AND THE SAD THING IS THEY DON'T EVEN KNOW THAT....When you are getting a $225 sign up cost and spending another $5-7 bucks in interconnection fees and your subs stay 24 months the formula becomes

MARKETING CONTRIBUTION = $12/MO. * 24 months = 288 > $225 = $63 BUT....add back SG&A and you have zero long term value....a big joke of a stock that is going to ZERO with increased competition from double and triple plays which cost $30 to sign up a sub...just a matter of time...the stock is already half way there.

SHORT THIS SHIT

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