RSSVonage Sued Over IPO Debacle
By Ed Oswald | Published June 5, 2006, 11:14 AM
After a disastrous initial public offering, Vonage was sued on Friday in United States District Court for the District of New Jersey. The class action lawsuit was filed on behalf of shareholders by the Atlanta-based law firm Motley Rice.
Vonage priced its stock at $17 per share when it debuted on the New York Stock Exchange on May 24. However, within the first day of trading the stock lost about 10 percent of its value. As of Monday morning, the stock was trading at $12.31, up 33 cents but down close to 30 percent from its IPO price.
The suit centers on Vonage's unusual offering of IPO stock directly to its customers. Lawyers say this was a move to ensure the sales of stocks after it became apparent that the company may be a hard sale to institutional investors.
Furthermore, they say that the IPO was pushed for by both the company and its investors as a way to recoup losses. Vonage, while the nation's largest VoIP provider, has never turned a profit.
Shareholders who had agreed to buy stock are now having second thoughts, with some even threatening not to pay for shares purchased. Vonage responded last week, saying its customers were "obligated to purchase their share allocation from the underwriters."
Motley Rice has encouraged investors and customers who bought shares through the program to explore their legal options. The firm said that Vonage's actions are directly tied to the loss in share price.
"The decline in value of these shares has been substantially exacerbated by many Vonage customers who participated in the pre-sale now refusing to pay for their shares," it said in a statement.
Vonage is accused of breaking several laws, including one that says it "must have a reasonable basis for believing that the recommendation [of buying shares] is suitable for the customer," as well as publishing a materially false and misleading joint Registration Statement and prospectus.
The suit also names the underwriters of the offering as defendants, which include Deutsche Bank, Citgroup and UBS.
I am a proud user of the Vonage VOIP Service and have no problems with them what so ever. I was given the offering and read the prospectus very carefully. I didn't buy 1)It stated that the Co. had not made a profit from day one due to marketing. 2)That it would not anticapate making a profit for the next 2 years. After that if You bought you better be in it for the long haul !!!! And gee just maybe some of the other VOIP suppliers put this Motley Crew up to the suit to keep the Co. in litigation. I wouldn't put it past them.
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|You knew things were going sideways when Vonage offered IPO shares to customers....
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|If you can't afford to lost your invest/trade money, don't invest/trade. Investing/Trading is nothing but gambling in a fancy name.
If the judge allowing this case to go to court, we can expect more coming, and even worst a major crash will be on the way. Because one this get hearing, people will think they have find the holy grail. If they lost money, they will sue. Even if they make money, they will sue. Why, because the guy next to him make 100% last year, while his account only make 30% during the same period. His will sue for the difference.
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|"Investing/Trading is nothing but gambling in a fancy name."
pfffffffffft ... hahahahahaha ... remind me to laugh at you when you're still working at 80.
two words: mutual fund.
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|Remind me to laugh at you when you're working at 80 because your mutual fund can't bail you out.
If I want someone to manage my manager, I will use ETF, it make more sense than go to a mutual fund. Don't act like you know money when you cant even make financial sense.
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|I actually thought about buying into this myself. I just didn't have the $1700 to loose. I've been wanting to get into the stock market for a while, but again don't have the cash. I've been following the posts on vonage_forum.com, and would have to agree with the sentiment that this lawsuit is ridiculous. There were plenty of warnings. I'm still trying to decide if I want to get in as the price seems to stabilize around $12. I just opened a sharebuilder account, and am in for $100 just to see how it plays out. A piddly sum, I know, but I don't feel like putting out more for my first stock purchase. (besides 401k)
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|I don't see how any customers that chose to participate in the IPO could win this suit. There were like 40 different warnings when you sign up stating "You may lose all of your money" I was actually going to sign up for this but chose not to after thinking it was a scam. The website was registered to a PO box and Vonage wouldn't return my calls to verify that this was legit. This was put together very poorly in my opinion. Luckily we have number portability finally so I'm not locked into Vonage for the rest of my life in order to keep my phone number.
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|This is another case why our legal system is failing. Lawfirm can filed a lawsuit on "behalf" for anybody without someone bring a case to them. I am not sure if they have any plaintiff, but I read an article on eithe Forbe/Fortune that there are plenty of these firms out there that filed suit "on behalf" and then go out to get the plaintiffs.
And this case is ridiculous. What do they think Wall Street is? And how do they think price is make up in stock? They think if they put money in a company, their stock to go up, or else they will sue for their money back. People need to take responsiblities of their own actions.
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|California scrappy just this kind of no-plaintiff lawsuit which is filed on behalf of the public a couple of years ago. Hopefully the rest of the nation will follow suit.
However, if Vonage conducted shady operations, then they need to be smacked for it (though I hope it doesn't affect my Vonage bill). I thought about going with the customer investment opportunity for a bit, but there was a minimum 100-share purchase, and I just couldn't afford it. I'm rather glad I chose to spend the money on rent instead. :)
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|Laws by Lawyers for the benefit of Lawyers.
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|First of all, before buying, you should have Googled "Jeffery Citron" and found that he previously had been charge with stock manipulation, prior to starting Vonage. Is this the guy you want handling your life savings? Second, if you had been following the trends, there is a price war going on with Voip, with two competitors to Vonage recently offering 2 full years of unlimited service for a total of $199, or less than $100 per year. No one can make a profit when prices drop that low. And, third, every cable company has a Voip product that they want to sell to their clients, hoping to take some of the profits of the Vonages of the world. Stocks trade on future earnings and the street is telling you that earnings might be a problem. You have a much better chance throwing a dart at a company that makes ethanol fuel, because at least there is no competition in that industry and plenty of room for more companies. Hint, check what the WSJ said about the Verasun IPO for next week.
As for lawyers, nothing good to say about them.
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