The suit filed on Friday in the United States District Court for the District of New Jersey by the Atlanta-based law firm Motley Rice asserts that the Internet telephony provider, its officers and the IPO's underwriters misled investors.
Vonage's stock, which debuted on the New York Stock Exchange on May 24 at $17 per share, has lost about 30 percent of its value in its first seven days of trading. The complaint filed against Vonage claims that the company's investors were motivated to push for an IPO because the company had been losing money, and the investors were desperate for an exit strategy. Vonage raised about $531 million from the offering.
As a Vonage customer, I felt that the whole “special allocation” felt bizarre. I am glad I did not get tempted.
In my mind, this makes Vonage the most successful IPO in many years, at least since such former luminaries like Internet Capital Group (Nasdaq: ICGE), Autobytel.com (Nasdaq: ABTL), and Delta Three (Nasdaq: DDDC) came screaming out of the box in the late 1990s at many times their actual value.
In every other form of commerce, “success” is determined by someone's ability to generate profits, or to sell something for more than it is worth. Vonage's management and underwriters convinced a bunch of people and institutions that a company worth roughly the price of a Happy Meal should be valued on the market at $2.6 billion!