The Vonage IPO and post IPO saga is getting stranger by the day – in a way that could get them a direct nomination for Business 2.0’s Dumbest 101 Things list that comes out at the end of the calendar year. On paper it seemed like such a good idea – customers, the biggest evangelists for Vonage would get to participate in the upside in the stock if they invested in the company as well. In fact they left aside the 15% of the 31.25 million shares the company was offering to the public.
Well, that was really optimistic. Still, about 10,000 Vonage customers took the bait and bought the shares at $17 a share. The stock, as predicted tanked, and well, some of the customers who saw their cash simply evaporate decided that they were not really interested in the stock.
So Vonage has to make the bankers whole, and pay for those shares. Now other customers who paid for the stock are upset that they got cheated and are clamoring for a buyback.
Okay so this can be fixed with cash, but what happens when this stock-fall leads of a customer exodus. Someone who has lost money on the stock isn’t likely to be a loyal customer for long?
The problem is that the worst might not be over for the stock. In a snap poll of GigaOM readers, we found that nearly 63% expect the stock to go below $10 and about 27% who voted thought that the stock is going to skid below the $5 mark. Okay, so perhaps that’s not scientific, but the trend line calls for pain.
29 thoughts on “Vonage IPO and Very Angry Customers”
If you want to make money off companies like Vonage, invest in the companies that make the terminal adapters, VoIP phones, etc (e.g. PhoneGnome). They’ll work with any provider, so by betting on them, you’re not betting on a retail sales strategy, which is more like gambling these days.
IMHO, I always thought Vonage was a cockroach stock, 100s of millions of VC funding, top heavy management, mediocre product, long-term competitive disadvantage re: cable companies, etc. I don’t what else people thought was going to happen.
Nice to see the ruse exposed so quickly. Usually these types of companies manage to perpetuate the “story” (read: lie) long enough for the insiders to dump their stock onto unsuspecting rubes.
nice post 🙂 u had to see this one coming
Wait until the SEC steps in (I predict by Monday) and makes them rescind the whole deal, ouch!!!! No way are they going to get away with letting only certain people welch on the deal.
In your snap poll only 36% said that it would go below $10. You transposed the numbers in your post.
Vonage is now refusing to buy back shares or subsidize losses to Vonage customers. IPO plan for customers backfires.
This is getting very ugly; a marketing fiasco.
OH Here it comes… Now that Vonage customers LOST money on the IPO I can see The Vonage commercials of “Stupid things people do” coming soon.
Various shoots I have thought of, A man flushing money down the toilet, Another Man Giving money to his Wife, only to find that she used the money on buying a gift for her boyfriend :), Another man putting money in his mattress and then coming home from work and seeing smoke in the sky and finding his house on fire.
Oh yes… The stupid things people do…
Hmmm… What’s the documentation for “very angry customers”? That the stock went down? Is it written that buying stock in an initial public offering is a guarantee for making money? I thought we lived in a free economy that entails both the potential for making AND losing money. And I thought that, generally speaking, initial public offerings were considered THE riskiest shares to buy? Would you like Congress to guarantee that shares offered initially to the public be guaranteed to make money for those who buy the shares?
I bought shares in the directed share program. The risks of buying shares were very clearly articulated through the process. I was not allowed to buy shares in the program without repeatedly acknowledging that I had read the prospectus and understood the risks of buying shares in the program.
The value of my shares have declined in the first two weeks of trading, from the $17 to the ~$12 now. I got to buy the shares because I have been a customer of Vonage since at least December 2005: meaning I am a HAPPY customer, one who continues to renew and does not have any issues with the price I am paying or the service I am getting in return for that service.
What is it about Vonage that leads you to rant in such an unwarranted fashion because the market prices the company lower than the shares were offered at? What is it about the IPO process that leads you to think that a company that underprices its shares is so much better than one that overprices its shares?
I’m a whole lot more interested in what the value of the shares will be in one year or two years or even 10 years. That will say a lot more about the real value that Vonage has created (or not) over time.
I have tried their service twice over the last couple of years and both the times had to abandon it – due to poor quality and poor customer service.
First time I tried it for my home. Next time, against my oposition, some of my company colleagues convinced me to give it a try for our startup. Bad idea. It was poor quality throughout.
I’ve had AT&T VOIP at home for couple of years – works like a charm.
Looks like the word is getting around (reflected in their stock price).
All those who understands the voip market will know that the vonage model will not last for long and this is what is reflecting in their shares. I expect the shares to fall even furhter too. Providing voip service is much easier to startup than pstn so there are much competition out there. Infact lots of voip service providers are given away some of the things vonage and some others are selling. Vonage became so popular because of agressive advertising and the painful reality is that what happened will make lot of their customers look elsewhere.
Now that they have to pay into the Universal Sevice Fund – can we say margins will get crimped even faster – under $10 is in the bag.
I love the Financial Guru’s of Om’s Band have spoken…15 to 25 Bloggers do NOT make a financial Model run…what is the Vonage Model??? It has been to spend, spend, spend…five days dont make a stock investment…lets see what Vonage does in damage control before you guys SINK the SHIP with the Baby onboard!
pchi, no Om did not transpose the numbers. 36 27 = 63. You should be smart enough to figure out how he got to that number.
It’s a polling trick. 🙂
Om, I love the Vonage fanboys coming out to defend them in full force. I like how Stewart thinks this company will be around for 10 years…lol.
In my comment above, it should read “36 plus 27 = 63.”
Stewart is right in that many companies’ IPOs fall after issue, and not all those companies are bad long-term holdings. I can’t comment expertly on Vonage’s prospects… but people who read blogs probably use Skype, who probably still beat Vonage on a per-minute basis for the average caller, even before they offered free NA to-phone calling (the only beef that I have with Skype so far is that their international (NA to Europe) call quality is often bad). I also find Vonage’s ads are really annoying… IMHO they do betray some problems, but then again very few commercials appeal to me.
This is as bad a situation as Vonage could imagine. If they buy back the shares of people who refuse to pay, they face a possible class action suit from investors who DO honor their debts. If they don’t, their IPO underwriters (Deutsche Bank, Citigroup, et al) could potentially sue them. In either case, Vonage’s plan to generate goodwill among customers has instead angered some. Combine this situation with Vonage’s recent technical problems going into the IPO, and the fact that Vonage is still in its quiet period and can’t publically say much to try and placate investors. AND the fact that the SEC will almost certainly have to step into this situation. Vonage is really in a tight spot. Wow.
SEC stepping into a Citron business will also raise eyebrows.
My pattern detection was as biased by Om’s penchant for typos as it is for failing to recognize that 50% think Vonage is worth more than $5.
When the Directed Shares Program was proposed last year with the early S-1 filings, I figured it was a tool to try to reduce churn during the period from S-1 to IPO. I’m not sure if churn had been increasing at Vonage leading up to the S-1 filing, but it seemed like this was a carrot to keep more customers on the service.
Did it work? Did churn rates stabilize or decrease over the last 6 months?
Maybe any churn introduced by dissatisfaction with the DSP can be balanced by reduced churn leading into the IPO.
The PR issue, though, cannot. And for a company that basically plans on spending the IPO cash on more marketing, that is unfortunate.
Wanna put your money where your mind-mouth is?
for everyone who has an opinion abot Vonage–lucky you, on Friday June 2, equity options will be open for trading.
I chuckled when I saw the strike list–with stock skidding down its oily slide, the exchanges will have the 10/ 12.5/15 strikes. I asked an LMM–what about the jun 7.5 kind?
To Stewart–a shareholder of VG who is a HAPPY customer–who wonders what the value of this company will be in 1 year, or 10 years. Value? forget value–don’t buy anything because you “are happy and love it”…you must be the guy that won’t dump the lying/cheating/moneyrobbing girl because she promised she would make you happy.
stay with a stock that delivers, you sap.
C A R L O S
According to the Wall Street Journal, due to a technical problem with their initial offer to customers (no hyperlink to the prospectus) Vonage may be forced to repurchase the stock from customers that bought in.
When they offered shares to customers, that definitely raised a red flag!
The big issue with Vonage and their stock price is that they’re not making money. When they start to close that loss gap, I’ll be a lot more cheerful about their stock price. Until that point, I don’t see a bottom for their offering.
I’ve used their service for 2 years with zero problems. I quite like it.
I tried vonage! terrable voice quality and service. every time I tried to contact them there was inevitably an 15 to 20 min wait to talk to someone that couldn’t realy speek engilsh, then another transfer taking another 10 to 15 minutes to talk to someone else. Finally got fed up and canceled my service and was charged for the disconect fee and the price of the telephone router that was supposed to be free. I was informed I could return the router for a refund of the purchase price and did so. Now they are telling me I cannot get a refund or get the router I paid for returned.
I tried vonage!! lousy voice quality & service. after many calls and having to wait 15 to 20 minutes for someone who couldnt speek vevy much english I decided to cancel my service. I was charged a disconect fee and also charged for the router that was supposed to be free and told if I returned it I would be credited for the price of the router. Now I have been told I will not be getting a refund for the router and they say they will not return it to me.
for anyone considering switching to Vonage.
DON’T DO IT!!!!!
Happy Igonet User
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Ex Bell User