Vonage Vows to Pursue Customers Who Renege on IPO

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."

Comments

What?

[Don_dumb]

I have read TFA, but I still dont understand.

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?

Sued the customers, now sue the owners

[syousef]

This is actually quite funny. I thought it was insane that the MPAA and RIAA were so willing to sue their own customers if they didn't do everything legitimately but this is new: Sue your owners. Now let's get Metallica involved and we should see the comedy skits and cartoons roll across our web pages - it'll be even better than the Napster thing.

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

[Don_dumb]

Can't wait till a company gets so desperate it sues itself. (I bet it's already happened and I get lots of links).

It just so happened three years ago, that Fox News attempted to sue the makers of the Simpsons - http://washingtontimes.com/entertainment/20031029- 091743-7849r.htm, both are of course part of the same company.
It just goes to show that too many suits 'Sue first, think later'.

Re:Sued the customers, now sue the owners

[nodwick]

Re: vonage: there's nothing weird about sueing someone who breaches a contract (even a verbal contract) with you. 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.

A lot of the complaints have centered around the really poor execution of the sale. Shares were supposed to be issued to the buyers at the IPO price immediately, so that buyers could then trade them on the first day. Instead, the underwriters screwed up their purchasing system so that buyers couldn't put stop-loss orders or sell their shares on the way down and limit their losses; instead, the computer system refused to accept sells and forced them to sit there watching the share price fall. Even worse, some buyers were initially told they weren't allocated shares, only to find out at the end of that day that they actually were given shares. (To extend your analogy, how would you feel about initially being told you wouldn't get any shares, then the price tanked, and THEN you were told that whoops, we made a mistake, and we're going to be selling you shares at a 12% markup to the current market price anyhow?)

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), this is going to generate a lot more negative PR with both their current customer base and potential future customers.

a small mistake at the start?

[EsonLinji]

Aren't stock prices meant to go up after an IPO for at least a few days so the investment brokers can offload the shares at a profit before the stock drops? This seems to have been really poorly organised.

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.