That Vonage’s IPO has been disastrous is nothing new. But, each day brings more bad news for Vonage and I don’t see it ending any time soon. First, despite Vonage’s recent statement that it expects customers who purchased pre-IPO shares to make good on their commitments, Vonage may have made a major misstep that could let those customers off the hook.
The VoIP pioneer may have violated securities law by soliciting share purchases from customers without providing a link to a prospectus. In a document filed with the SEC prior to the IPO, the company admitted that in the emails and voice mails it sent to customers soliciting their purchases, Vonage did not provide a link to the most recent prospectus, as required by the SEC.
This error could give disgruntled customers/stock purchasers an excuse not to pay for the now-sinking stock.
“Recipients could seek to recover damages or seek to require us to repurchase their shares at the IPO price,” the company said in the filing.
Vonage, however, said it rectified the problem by requiring cusotmers to read the prospectus before they actually agreed to buy the stock.
There is plenty of blame to go around. Some observers blame the investment banks for valuing the stock too high to begin with.
“Investment banks are supposed to do a better job at pricing a stock,” said Robert V. Green, a telecommunications industry strategist with Briefing.com, a financial analysis firm. The disconnect between the price and investors’ willingness to pay, he said, led to a frantic sell-off.
“There was a mass exodus,” he added. “I.P.O. prices go down, but not this far, this fast.”
The real problem now is that this is a story with legs — the press is on the case and more bad publicity is in the offing for Vonage, probably for weeks, if not months, to come. Count on at least one class-action lawsuit, and maybe an SEC investigation. All this fallout will continue to grab headlines, chew up the company’s PR and legal budget and further alienate customers and drive down the stock.
Richard Greenfield from Pali Capital characterizes the possible melt-down more moderately.
“Instead of rewarding people and driving loyalty, this could actually have backfired,” said Richard S. Greenfield, a telecommunications industry analyst with Pali Research. “How much more is Vonage going to have to spend in marketing to rebuild its image and visibility?”
I think it’s only the beginning of a very ugly ride for Vonage.
Posted by Cynthia Brumfield at 12:09 PM | Print | Comments (0)
The feds are keeping up the pressure on ISPs and other Internet companies to adopt mandatory data retention policies that would store data on user activity for up to two years. CNET’s Declan McCullagh has been on this trail for sometime now and reports on a meeting held yesterday with 15 industry representatives at the Justice Department during which Attorney General Alberto Gonzales and FBI Director Robert Mueller pressed the companies to agree to keep the data for law enforcement purposes.
AOL, Comcast, Google, Microsoft, Verizon Communications and trade associations had representatives at the meeting. What’s murky is exactly what the government wants the companies to retain. According to this report from The New York Times’ Saul Hansell and Eric Lichtblau nothing definitive is on the table although general parameters have been floated. (A read of these two articles leaves the impression that DOJ and the FBI are kind of flailing about, holding meetings with no specific agenda, and taking their time to arrive at actionable proposals).
While initial proposals were vague, executives from companies that attended the meeting said they gathered that the department was interested in records that would allow them to identify which individuals visited certain Web sites and possibly conducted searches using certain terms.
It also wants the Internet companies to retain records about whom their users exchange e-mail with, but not the contents of e-mail messages, the executives said. The executives spoke on the condition that they not be identified because they did not want to offend the Justice Department.
A number of mandatory data retention laws have been introduced that would expand the storage of personal online data. Yesterday, the Center for Democracy and Technology released this memo that highlights the dangers inherent in those proposals. Aside from the obvious risks these draft bills pose to personal privacy generally, the vast collection of data could serve as “honeypots” for trial lawyers in civil cases and are “not likely to be effective” given the “one-size-fits-all” specifications, which may not be specific enough in certain cases, the CDT says.
Posted by Cynthia Brumfield at 9:06 AM | Print | Comments (0)
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