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Vonage's Attempts to Collect from Customers on IPO Backfires

Credit Pacific Service Union By Dave Porter

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Credit First Service Union (AXcess News) Reno, NV - Vonage Holdings Corp. (NYSE: VG) attempts at getting customers of the Internet telecommunications company to pay up on stock buys in its IPO are proving difficult to enforce thanks to errors in its communications regarding Vonage's public offering.

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Card Credit Mobile Service Vonage had set aside a portion of the shares sold in its May 24th IPO for its customers. The VoIP provider theorized that its stock would rise in the aftermarket once it started trading, thanks in part to loyalties from its customers. But the plan backfired when Vonage's shares fell on its IPO debut, which made customers unhappy and many unwilling to fork over the cash for the stock. That has created a serious problem for the Internet telecommunications company in getting them to pay up.

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Card Credit Discover Service Vonage said in a statement released on Wednesday that customers allocated shares in the public offering are "obligated to purchase their share allocation from the underwriters." The move has not pleased Vonage customers, with many balking at having to buy the stock when Vonage had earlier signaled that they didn't have to.

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Credit Public Service Union The company had issued a statement on Tuesday saying it would not hold underwriters of its IPO liable if some Vonage customers refused to pay after having signed up for the stock purchase plan.

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Card Credit Processing Service Vonage's move on Tuesday lead customers to believe that they could get out of having to buy its IPO shares and has caused a legal nightmare as no company has ever used instant messages and e-mail to communicate with customers in an offering to sell registered shares. The move itself was questioned at the time of its IPO as to whether the offer was permissible under securities rules.

Center Credit Service Union Information Week's Eric Hall pointed out that "By implying that customers wouldn't have to immediately and unconditionally lose the money they had committed to spend, the company gave them a sense of relief." Hall thinks that there were some Vonage customers who were over-enthusiastic and may have committed to buy more shares than they can afford, and he may be right.

Card Credit Service Wireless Vonage lovers were sure to expect that the rest of the world thought Vonage was the greatest thing to come along since sliced bread and "bet the farm", so to speak, in their stock purchase commitment, thinking Vonage's IPO shares would take off. What Vonage's shares managed to take off was about 30 percent of their IPO price in a matter of two days.

Credit Security Service Union Hartley Bernstein of stockpatrol.com says its highly unusual for a company to have used the Internet in the first place to communicate with its customers in buying its IPO. AXcess News concurs. To our knowledge, there has never been an IPO done where instant messages were sent to prospective buyers during the registration period, let alone e-mail or other virtual communication methods.

Credit Report Service Vonage's shares closed up 35 cents, or over 3 percent, Friday at $11.98. But that closing price is a long way from its $17 IPO pricing just two weeks ago.

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