May 31, 2006
Vonage Stock-Buying Customers Hopping Mad
Lesson-learned for Vonage: don’t try to sell your company’s overpriced stock to customers that you need to retain in order to bolster your stock price. As this piece by the New York Times’ Ken Belson and Matt Richtel attests, some customers who purchased Vonage stock in the “directed share program” opted not to pay for the stock once it started sinking.
Vonage won’t, however, dun those customers.
Vonage said in a statement given to the “Squawk Box” program on CNBC: “While all avenues are available to us, we cannot imagine alienating our customers in that way.” The company added that if some participants in the program did not pay, “we expect to repurchase the shares from the underwriters if necessary.”
Only about 10,000 customers chose to buy the stock, so that’s not the real problem. The real problem is the perception that customer anger will further drive up churn, a big potential weakness for Vonage.
Pali Capital’s Richard Greenfield raised this red flag yesterday in a research note. He also wondered if Vonage would extend the same repurchase option to other investors who bought the stock.
We also wonder whether institutional shareholders will be offered the same “repurchase” option as DSP, institutional and retail investors all bought the same class of shares in Vonage?
Posted by Cynthia Brumfield at May 31, 2006 07:40 AM