Vonage Vows to Pursue Customers Who Renege on IPO 200
kamikaze-Tech writes "As its shares continued to sink following its initial public offering last
week, Vonage Holdings Corp. (VG) said it plans to hold Customers who promised to
buy IPO shares to their pledges. In a WSJ article posted in the Vonage Forums; a
Vonage spokeswoman said Wednesday the company will pursue payment from
customers who renege on
their agreements to pay for the botched IPO shares. Shares of Vonage,
which offers Internet-based phone service, immediately plunged from the $17 IPO
price, and they closed Wednesday at $12.02 in 4 p.m. "If they don't pay,
we will reserve our right to pursue payment," said Brooke Schulz. She added that
speculation that the company intends to buy shares back from disappointed
investors are false. "They are taking a risk if they choose not to pay," she
said."
They might need to delay gratification (Score:4, Funny)
Re:They might need to delay gratification (Score:4, Informative)
Hence those who had their Vonage stock converted in ordinary public shares already sold at $17, if they got ahold of these at lower price (or free as stock options) than they probably already have the Ferrari dealer on their friends list.
Re:They might need to delay gratification (Score:2)
Re:They might need to delay gratification (Score:3, Informative)
But the point of an IPO is to raise capital that can be used to grow a company through a mechanism that allows those investors to recieve a return based on future growth and/or interest in the company. (assuming said growth/interest happens)
As all investments carry a degree of risk, the situation of Vonage's shareholders is by no means uncomm
Re:They might need to delay gratification (Score:2)
That's assuming said insiders are not under a black out. Usually, there's a black out period of six months following the IPO, during which no insiders may sell their shares (some provisions allow them buy additional ones, which may then be sold, but they can't sell any opti
Re:They might need to delay gratification (Score:2)
OTC markets are for trades between two parties with no other party involved.
Yes I have a CFA (level 1 only though), why do you ask?
Re:They might need to delay gratification (Score:2)
Why, no I'm not perfect, why do you ask?
Re:They might need to delay gratification (Score:2)
I remember reading his message saying he was wealthy and then heard noting else about the matter.
Let's piss off investors and potential shareholder (Score:3, Insightful)
People love investing a pariah stock that reeks of desperation.
Re:Let's piss off investors and potential sharehol (Score:2, Insightful)
You have strange ideas about responsible corporate governance.
Re:Let's piss off investors and potential sharehol (Score:2)
Breaking a verbal contract is shitty. However, are the people legally obligated? I don't know.
Re:Let's piss off investors and potential sharehol (Score:4, Insightful)
As part of the process they gave an estimate for the float price and cautioned that you should have X funds ready to send. I guess the real question is was there enough information during the signup process to authenticate the person and informing them of the rules of the IPO. I would think so, but then again, IANAL.
I looked into the IPO as I qualified and actually committed to a certain amount of shares. However, after speaking with investor friends, they recommended staying away from the IPO for various reasons. I went back to the site and retracted my offer. So I'm not on the hook for these shares.
Re:Let's piss off investors and potential sharehol (Score:2)
Hopefully this experience will shake some sense into people who think that IPOs are a way to make easy money.
Re:Let's piss off investors and potential sharehol (Score:2)
Re:Let's piss off investors and potential sharehol (Score:2)
Does anyone know if companies are allowed to buy put options on their own stock? Because if they expected the stock to crash and burn, that would be a neat way to profit twice on the same stock, assuming it's legal....
Re:Let's piss off investors and potential sharehol (Score:4, Informative)
You're correct though, you weren't agreeing to purchase the shares before the IPO (since the price wasn't known), you were agreeing to purchase the shares at the opening IPO price.
Since the IPO was pretty bad, you've now got some upset people.
Did anyone read the financials? (Score:3, Interesting)
This was more an attempted robbery than an IPO.
Re:Let's piss off investors and potential sharehol (Score:5, Insightful)
What's better for investors, Vonage sitting on unsold shares with a paper value of $12.02 each or Vonage having $17 cash in the bank?
The more shares Vonage sells for $17, the more money it makes, and the more valuable it is as company, which should mean the shares go up. Good for investors, good for potential shareholders.
The only people this is bad for are the gamblers who agreed to pay $17 for something that turned out to be worth $12.02.
Re:Let's piss off investors and potential sharehol (Score:2)
Re:Let's piss off investors and potential sharehol (Score:2)
Um, where in the parent post was anything at all said about profit?
Re:Let's piss off investors and potential sharehol (Score:2)
It's a dumb move on their part- what they need to do is do things to improve the market's confidence in them, this isn't it.
Re:Let's piss off investors and potential sharehol (Score:2)
Yea, it won't piss off any of the investors.
You know nothing about the stock market. (Score:3, Informative)
Ummm....no.
There's something called supply and demand. At $17, the supply of the stock was greater than the demand. Hence the price fell. By pushing these sales, Vonage is foisting more supply on a market with already week demand.
The people who buy stock through this program don't sound like the buy-and-hold ty
Re:You know nothing about the stock market. (Score:2)
What about the investors who agreed to pay 17 dollars for something worth twelve and didn't back out of the deal? I'm pretty sure the perception of a fair market offering is important to these people.
Re:Let's piss off investors and potential sharehol (Score:2)
What? (Score:5, Interesting)
Does this mean that people have promised to buy shares at an agreed price, but because the price has already dropped they will not actually buy those shares?
If so, how did they 'promise', if they have done so in writing, then surely Vonage can demand they do buy those shares at that price?
Or is this a case of a company mucking up a floatation, realising that it is now massively in debt to external creditors and is trying to reclaim that money by threatening people?
Can someone please clear this up for me?
Re:What? (Score:2)
People may have promised to jump on the initial bandwagon for the IPO, however, no one knows what price the stock will open at. Google is the only company that effectively wrestled the market and determined their own opening stock price, which the SEC
Re:What? (Score:4, Informative)
I don't think it was the sec that had the problem. It was the investment bankers that couldn't make the billion dollars with their investment banker cronies in the usual fasion. The sec is there to protect us not them -- though it usually doesn't really bother...
Vonage originally offered not to pay (Score:5, Informative)
I submitted a story on this yesterday morning. Vonage went on CNBC Wednesday morning [nypost.com] and announced that it "is going to let some of its customers off the hook by buying their unwanted shares." The statement said that "While all avenues are available to us we cannot imagine alienating our customers in that way. If certain . . . customers don't pay we expect to repurchase shares from the underwriters if necessary."
People immediately started pointing out that it is illegal for a compnay to treat different shareholders in the same class differently -- Vonage was only offering to "make whole" (Wall Street speak for "absorb the losses of") investors that hadn't yet paid for their shares; people that had paid were SOL.
The whole IPO has basically been a mess, with snafus both in selling shares to their customers and delivering them. Some Vonage customers that they were led to believe that they "weren't allocated shares in the IPO [thestreet.com] when in fact they had received the shares. Others investors who purchased shares have complained that technical glitches on a Web site set up for Vonage customers prevented them from executing sales in a timely fashion."
I've had good experiences with the Vonage product as a customer, but there are many, many stories of how poorly Vonage customer service treats their customers. They're very slow in sorting out problems -- it took them 3 months to transfer my land-line phone number, and initially the temporary number they gave me was in a different area code than my city, putting me in a long-distance calling zone relative to my friends. It took hours before they fixed it (they kept claiming it wasn't "technically possible" to give me a new number). Analysts are worried that future propects for the company [businessweek.com] might not look so good, and that screwing over their own customers in the IPO might be the last straw.
Re:Vonage originally offered not to pay (Score:2)
Customers buy stuff from a company. Investors buy a piece of the company and hope that it has lots of happy customers.
Re:Vonage originally offered not to pay (Score:4, Insightful)
Internetoutsider.com [internetoutsider.com] has a good outline of the chain of events:
Re:What? (Score:3, Insightful)
Does this mean that people have promised to buy shares at an agreed price, but because the price has already dropped they will not actually buy those shares?
Basically, yes. Part of the registration for participation in Vonage's IPO was that you agreed to purchase a set amount of shares at $17. Now that the price is less than $17, it'd cost them money to fulfill this agreement, so they (understandably) want out of it.
If so, how did they 'promise', if they have done so in writing, then surely Vonage
Re:What? (Score:5, Insightful)
Alternatively, you could argue that a class act would stop bleating about how his "can't miss" money-making proposition didn't work out the way he'd hoped and pony up the cash that he'd freely agreed to pay.
Just a thought. I don't really care one way or the other, but it would be nice to see someone standing up for the notion of personal responsibility.
Re:What? (Score:2)
Re:What? (Score:2)
If you buy wheat futures and the price of wheat goes down, you're screwed.
Even if the US Government signs the Treaty of Ghent and the other guy doesn't tell you about it, you're screwed! [Laidlaw v
Re:What? (Score:2, Insightful)
In this case the IPO actually went down, so it looks like these same investors want it both ways, to make piles of money when an IPO is sucessful and take no risk when a IPO tanks.
IPO underwriting (Score:2)
However, to clear up a common misconception, most IPOs are actually "best-efforts" IPO, not a "firm-commitment" IPO. The main difference is that in a "firm-commitment" IPO, the underwriters (or a syndicate of underwriters) essentially buy the whole offering for a set price and resell them to their clients. In a "best-efforts" IPO, the underwriters are only required to transact the amount of shares to fulfil their client's
News for MBAs (Score:3, Funny)
Sued the customers, now sue the owners (Score:5, Interesting)
Can't wait till a company gets so desperate it sues itself. (I bet it's already happened and I get lots of links).
Re:Sued the customers, now sue the owners (Score:5, Insightful)
Why would it matter that the contract is about share deals, or anything else?
Can you imagine how the prospective buyers would react if the shares had shot up, and Vonage management had said that they'd decided to sell them at the higher price?
If you want to become a stock market speculators, you have to learn to cope with the fact your going to be wrong sometimes, and suck up the loss you take.
Re:Sued the customers, now sue the owners (Score:5, Interesting)
Note that IPO shares are typically priced slightly below what the company thinks the fair value is, in order to give the initial purchasers a good deal. The more paranoid (cynical?) have suggested that Vonage deliberately overpriced its shares and used its own customers to prop up its IPO price. Given that customer relations for the company weren't stellar to begin with (too many horror stories dealing with their staff [weekly.org]), this is going to generate a lot more negative PR with both their current customer base and potential future customers.
Re:Sued the customers, now sue the owners (Score:2, Interesting)
If Vonage screwed up, they screwed up, and they'll lose their lawsuits. But that doesn't invalidate my initial point -- in the absence of various irregularities, a breach of contract suit would be normal common practice. Sorting out this sort of mess, and finding who is to blame is something that courts (with the SEC) are good for.
Re:Sued the customers, now sue the owners (Score:2)
Re:Sued the customers, now sue the owners (Score:2)
I wasn't able to make it to the "setup online share account" step - there was no link for me. I tried for like an hour - and eventually just gave up.
i certainly hope that they don't try to come after me - or actua
Re:Sued the customers, now sue the owners (Score:2)
The point is, even if there is a legal right to sue, does it make sense to do it? Do you sue your customers and prospective owners, such that they can vote you off the board, or dump the shares on the open market and sign up to Packet8 or other services? That sounds retarded. I don't care if it was a breach of contract, it is dumb to enforce this contract. That is, if there ever was a contract, the press release isn't clear.
Given that the stock price dropped q
Re:Sued the customers, now sue the owners (Score:2)
Vonage will likely send out some legal letters to see who they can scare into paying, but if they actually try to take legal action to collect, they will find themselves on the other end of a lawsuit from all the pissed off cu
Re:Sued the customers, now sue the owners (Score:2)
Mutually beneficial is ex ante vs ex post. Ex ante, there was no way of knowing: you made a gamble and lost.
Finally, your "backing out of the car sale" is: You lose.
Neri v. Retail Marine: If you're backing out of a car purchase the car dealership will get the expected profits without having to mitigate da
Re:Sued the customers, now sue the owners (Score:2)
Metallica probably wouldn't be interested but im pretty sure SCO are ;)
Re:Sued the customers, now sue the owners (Score:5, Interesting)
It just goes to show that too many suits 'Sue first, think later'.
Re:Sued the customers, now sue the owners (Score:4, Informative)
Re:Sued the customers, now sue the owners (Score:2)
It just so happens that was a clever hoax started by Matt Groening who was pulling a reporter's leg.
Re:Sued the customers, now sue the owners (Score:2, Offtopic)
Vonage IPO (Score:4, Interesting)
Re:Vonage IPO (Score:2)
They can't come after you if you didn't actually follow through on the order. Deciding not to do it *beforehand* is OK - *after the fact* not so much.
On another note, to all the people who a
Re:Vonage IPO (Score:2)
2) If you are getting 1.5% on your savings account, you need to get a better savings account. On line banks are offering over 4% these days.
Also, the investment bankers who hung this IPO out to dry ought to be shot.
Re:Vonage IPO (Score:2)
Re:Vonage IPO (Score:2)
I did the same thing (Score:2)
And to clarify what JWSmythe is talking about "coming after him" is that we curious Vonage customers had to sign up with an account and go through steps to read about the IPO with a special account tied to our phone number and customer number. The worry is that those who went through the process as far as seeing the price and deciding against it, might be persued by zealous lawyers if enough
a small mistake at the start? (Score:4, Interesting)
As to the practicalities, if someones signed a contract saying they'll buy so many shares at a certain price, you can't blame the other party for holding them to it, even if they do look like idiots doing so.
Re:a small mistake at the start? (Score:2)
Instead, you sign up people to buy the stock at some fixed, agreed upon price. This price will most of the time turn out to be somewhat lower than what the stock starts trading at -- if not, you'd not manage to sign up people for all the stock.
Now, I don't know why it's done like that, probably just tradition. The logical way to get a correct market-pricing for the stock from the get-go would be to hold an auction, and to give the stock to those willing to pay the most, for the
Re:a small mistake at the start? (Score:2)
It guarantees a certain share value (if all the shares are sold). Rightly or wrongly, lots of investors prefer a guarantee to an auction-dependant price.
It attracts people who invest in IPOs (because they usually go up) but are not interested investing in the particular market sector long term. These people smooth over the problem that while the company might be worth x per share, there isn't necessarily (x times the number of shares for sale) spare cash flo
Re:a small mistake at the start? (Score:2)
Since this is an Initial Public Offering, the contract also specifies WHEN those shares are to be sold. If Vonage was not able to distribute those shares to buyers in a timely fashion, there's a good argument that the entire contract is void.
Let's say I go to a car dealership and sign an agreement to buy a brand new car, with only 5 miles on the odometer, for $25K. But
Re:a small mistake at the start? (Score:2)
Re:a small mistake at the start? (Score:2)
You get LNUX shares going from $320 to $4 a share? :-) God, anybody who held onto that worthless VA Software stock has got to be kicking themselves.
Joe Average Customer (Score:2, Interesting)
Purchase price: 1,700.00
Current Value: 1,200.00
Loss Customer: 500.00
Vonage Phone Service Bill: $ 324.00 (pre IPO)
Vonage Phone Service Bill: $ 0.00 (post IPO)
Loss to Vonage: $ 324.00
5 years loss to Vonage: $1,620.00
Joe Average Customer becomes Joe Pissed off ex-customer.
Is relief in sight? (Score:4, Insightful)
Vonage *may* be justified in doing this.. (Score:4, Insightful)
I couldn't find any information about the IPO price-setting process in the United States but I am assuming (call it an educated guess) that, at some point prior to the IPO, Vonage must have announced to all participants in the IPO a confirmed price per share: in this case, $ 17 per share. It would then make sense to me that Vonage would be obliged to give participants the option of dropping out, or confirming that they are still interested in purchasing the shares.
Assuming all the above is true, I would think that, at the date of the IPO itself, purchases are contractually obliged to purchase those shares at $ 17 per share and pay up. The article seems to imply that the investors are now balking on their contractual obligation and refusing to pay up given that price per share has fallen in subsequent days.
However, I have not been able to find any evidence to suggest that Vonage has been unfair in its IPO process. Of course, as this story pans out, we may actually hear from some of the individuals involved.
I did, however, find an early SEC filing related to this auction, available here [sec.gov].
This filing doesn't seem to give any information about the proposed initial price, but I thought it was interesting that the company did disclose that theirs was a high risk stock, and listed several risk factors that could negatively impact the value of their stock.
Re:Vonage *may* be justified in doing this.. (Score:5, Informative)
*You "read" the prospectus (think EULA "check this box" kind of thing) that warned you extensively about the risk involved. Those risks were very clearly stated.
*You had to read a page on the risks involved, with all of them ending in "and you could lose all the money you invest"
*You created a limited purpose account with a brokerage.
*You were told to read the prospectus again.
*You made a conditional bid in 100 share increments, with the expectation that the price would be between $16-18. You were told that you could drop out at any time prior to the price being set, and that your bid, if accepted, would be binding.
*You were told that the price was about to be set.
*You were told to read the prospectus again.
*The price was set at $17.00
*You were told "The posting of this information and the final terms of the intial public offering constitutes the underwriters' acceptance of your conditional offer to purchase shares of Vonage common stock. Accordingly, you are now obligated to purchase the number of shares you have been allocated, if any."
Having gone through it, I have no doubt that they are on firm legal ground (IANAL). You had to accept (again EULA type) every single step of the way, and every time you logged into the website.
Thank God my bid wasn't accepted!
-ps
Re:Vonage *may* be justified in doing this.. (Score:2)
"the underwriters' acceptance of your conditional offer to purchase shares"
It's a conditional offer. You can withdraw it.
Re:Vonage *may* be justified in doing this.. (Score:2)
Re:Vonage *may* be justified in doing this.. (Score:2)
What is the problem? (Score:2, Interesting)
Re:What is the problem? (Score:2)
IPO's and investing (Score:2)
They have to pay for those shares they bought at that price.
I think IPO's are generally unsuitable for novice investors.
I would bet the customers not willing to pay were fully expecting quick easy money with no risk.
Those who participate in get rich quick schemes deserve what they get.
Re: IPO's and investing (Score:2)
> They have to pay for those shares they bought at that price.
I'm surprised to hear that it wasn't set up so that your money was handed over automatically.
Also, I suspect that the SEC would take a dim view of reneging on IPO commitments.
Re:IPO's and investing (Score:2)
Particularly since IPO's are guaranteed to go up.
Underwriters will sue the customers (Score:2, Insightful)
They have a duty to sue (Score:2, Informative)
If I were a director of Vonage and my boss the shareholders could possibly come after me in some manner for negligence if for example the company now sinks. So not only do I want to avoid exposing myself to being unable to be a director (if it were the UK) for a while, prison or huge payouts to the actual shareholders or sue people who were in breach of contract what would I do.
Gosh tha
Ya pays ya money and ya takes ya chances (Score:2)
Don't know the details of the contract, and the "article" is a blog entry. Ooh, sorry. It's a "forum" not a blog. Copied from the wsj.
Has any competent legal professional actually looked at this situation?
Vonage's position seems to be that these people signed a contract and they're bound by it.
The justification for not paying I'm seeing in the forum is "F--- Vonage. They suck. I'm not gonna pay. Sue me!"
Folks, if that's the best the investors can come up wi
Ironic... (Score:2)
Is "ogresque" a word? If it isn't, it is now...
Bad IPO + Good VOIP Service = ??? (Score:3, Informative)
It's called a contract... (Score:3, Insightful)
Everyone that signed up agreed to buy the stock despite incredibly dire warnings on the signup screens that the price may go down. If customers wanted to buy the stock only if it went up, they should have bought options [wikipedia.org].
Wow, this is one further than SCaldera has gone (Score:2)
Unless Vonage has a written contrat with those people they have no case.
Except in Utah
Bad Stock + Good Company = Great Stock (Score:2)
Re:Bad Stock + Good Company = Great Stock (Score:2)
Re:Bad Stock + Good Company = Great Stock (Score:2)
Worst. IPO. Ever. (Score:3, Insightful)
Vonage decides to "let the little guy in" by offering shares to customers. But it makes the huge blunder of not actually collecting the money, letting the customers merely agree to buy. These are, for the most part, unsophisticated investors who think that getting in on an IPO means free money, and that they always go up.
Now that the opposite has happened these "investors" not only want to walk away from the deal, they want to cancel their service! Here's what one participant said: " I have had enough of this company, refuse to pay for these shares, and am canceling my Vonage service, not because it is not a good service, just because i have lost all faith and trust in this company. "
Leaving aside any questions of his logic or good faith intentions, Vonage has dug themselves a huge hole and jumped right in. And it's going to get worse before it gets better. The only way these people can try to get out of paying is by canceling the service. So sooner or later Vonage is going to have to consider sucking it up and "forgive" all those promises to buy in order to keep their customers. But if they do that the stock plummets, and here comes a class-action lawsuit from the stockholders.
Re:Worst. IPO. Ever. (Score:4, Informative)
Contrast with VA Linux... (Score:2)
I got in on the VA Linux IPO. At the time, the tech IPO market was going insane, and Red Hat had, just a couple months before, shot up dramatically. I figured that the odds were small that we would lose money. We decided to go for it and my parents put in some money, too. I sold most of my shares the next day for a (really) hefty profit, and held onto a few (which are now worth... quite a bit less).
Short? (Score:2)
Why is everyone on the side of the gamblers? (Score:2)
These people who signed up thought they were going to get cheap stock and a quick and easy profit. They gambled and they lost. Awh. My heart breaks. Now pay up.
IPO's going wrong is nothing new and you always get these middle class people who thought they were going to get something for nothing bithing that now they find out what stocks
Vonage is nothing but a den of thieves (Score:2)
Worst customer service imaginable, except when signing up.
They keep billing after the customer cancels.
They claim they never receive returned equipment and charge for it.
The Vonage business model is theft.
Woo hoo, hoo hoo hoo! (Score:2)
Re:What kind of agreement? (Score:2)
Underwriters are already in the clear. (Score:2, Interesting)
Re:Vonage Sucks, period! (Score:2, Insightful)
Re:Vonage Sucks, period! (Score:2)
2. You need to ask what the rounding factor is for all companies--some bill by the 10 second, some by the minute. Most charge by the m
Re:They are taking a risk if they choose not to pa (Score:2)
Everyone complaining about this are complete and total fucking morons.
Re:Risk of the stock market... (Score:2)
Re:The Vonage IPO renegers will probably win.... (Score:2)