Thursday, April 19, 2007

Vonage Disconnect

Vonage, a VoIP company, held it's IPO nearly a year ago on 5/24/06, at a $17/share, the middle of its targeted rage. The stock dropped to $13 in the first 2 days, and has been on a downward tumble since. Currently it is trading at $3.

Bill Mann of the Motley Fool, wrote an article back on 5/30/06 called "Vonage: The Most Successful IPO in Years". His logic follows, and I couldn't agree more:

"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!"

What's in store for Vonage? Only time will tell, but they have consistently been loosing tens of millions of dollars a month. In their recent 10-Q they said "Intellectual property litigation, especially our ongoing patent litigation with Verizon, if determined against us, could lead to the bankruptcy or liquidation of the company. " That's just not a good sign.