Vonage extends deadline for IPO payments

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Vonage extends deadline for IPO payments

Heidi Moore

12 Jun 2006

Internet phone service provider Vonage made a concession to restive shareholders in the continuing saga of its troubled initial public offering on Thursday by extending the deadline for payment of their shares to June 13.

The extension for settling trades gives dissatisfied investors more time to settle their trades, or officially pay cash for shares they pre-ordered. But the investors will get no discounts on the price of Vonage’s shares, which are trading sharply downward from their $17 offering price when Vonage listed on the New York Stock Exchange on May 24. The shares quickly started trading downward from there, bounced briefly upwards, then hit a new low of $11.33 in midday trading today.

The previous deadline to settle trades was May 30. Sal Morreale, who tracks IPOs for Cantor Fitzgerald LP, said such an extension is highly unusual, and should be read as a way for the underwriters to “placate investors.”

“It’s a few extra days to pay, but you still have to pay,” Morreale said.

Vonage is struggling with a raft of other major obstacles, most related to the IPO.

The Wall Street Journal reported Friday that the New York Stock Exchange is investigating the possibility that the IPO was harmed by "naked" short-selling - an illegal practice in which investors short a stock without ever borrowing it first.

In addition, Vonage admitted on June 12 that it had spoken too soon in late May when it pronounced the end of a Federal Trade Commission investigation into the company’s compliance with US emergency-9/11 rules.

The fall in Vonage’s share price also has already spurred one class-action lawsuit, alleging that Vonage did not properly vet some of the buyers of the IPO and that the company omitted key information about top executives.

Equity markets professionals questioned the valuation of the IPO even before the shares listed, complaining that the $17 price was too high. Nonetheless, the offering was said to be five times oversubscribed, meaning that there five times as many buyers as there were shares available. Vonage sold 32.5 million shares in the IPO.

The underwriters of the offering are Citigroup Global Markets, UBS Investment Bank and Deutsche Bank Securities along with Bear Stearns, Piper Jaffray, and Thomas Weisel Partners.

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