I don't mean to jump on the sick-horse-kicking bandwagon, but it appears Vonage has invented a new kind of leverage. The company reserved about 14% of its IPO shares for its customers. In other circumstances, this might be seen as a perk: Buy the service, get hot stock. In this case, however, at least in the early going, it's proving to be an efficient way to engender widespread customer frustration.
At this writing, Vonage customers who took the company up on its offer have lost 15% of their money. Some of them, presumably, are now selling their stock to non-customers who were savvy or fortunate enough to wait until the stock started trading. Even if the stock recovers from here, Vonage customers will no doubt remember that they could have done better. And if the stock continues tanking...well, then, even Vonage customers who love the VOIP service will feel nothing but bile toward the company.
To put this in perspective: A Vonage customer who bought 100 shares of stock at $17 ($1,700) is now down about $200--the equivalent of about 8 months of Vonage bills. Looked at differently, customers dumb enough to take Vonage up on its apparently generous offer will now pay twice as much for the VOIP service for the next 8 months as customers who just said "no, thanks." One doubts that this will foment the delirious customer evangelism and loyalty that some companies enjoy.
Given the difficulty Vonage had generating institutional demand for its IPO (witness the tanking stock), a cynic might suggest that the apparently customer-friendly IPO gesture was actually just a savvy capital-raising move: "Our customers don't know jack about IPO valuations--so let's sell 'em stock!" Or, perhaps, Vonage is just so confident in the future of its company and stock price that it is sure its currently chagrined customer-IPO-buyers will be grateful later.
In any case, if the stock stays in the tank, it will be interesting to see how many customers quit Vonage's service because they have lost money in Vonage's stock.
An anecdotal report from the AP along these lines:
Anthony Sgroi of Bergen County, N.J., has had Vonage service for a year and half, and asked for 1,000 IPO shares. He received 300. Other Vonage customers on an online forum reported similar allocations, indicating strong interest from the group.
It wasn't the company's long-term prospects that attracted Sgroi to the deal, however.
"I'm not a big stock market guy ... when I got the option to buy the IPO, I figured it was a chance to make some quick cash," Sgroi said. "I was planning to sell within a week or so anyway."
He sold the stock Wednesday morning at a loss. Now, he plans to cancel his Vonage account and switch to the local cable company's competing service, which he said would save him $10 a month.
"I'll try to recoup some of my losses that way," Sgroi said.