May 26, 2006 4:00 AM PDT
Vonage future looks troubled
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But some analysts fear competition is only one of the many worries that Vonage faces. The decline in the company's stock price over the last couple of days could spur lawsuits.
"There is always a risk of a lawsuit whenever you put together a public offering," said Jocelyn Arel, a partner at Goodwin Procter, a law firm based in Boston. "Nine times out of 10 when you see a company come out and take a nose dive like Vonage did, you see plaintiffs circling to file lawsuits."
Vonage also may have damaged its relationship with some of its customers. About 13.5 percent of the shares offered during the IPO were sold to customers. Demand was strong for the shares before the IPO, as some customers may have had flashbacks of the IPO heydays of the late 1990s. But now that the stock has fallen so fast and so quickly, some of those customers could be displeased.
"If customers got hung out to dry, they're not going to stick around with the service," said Comack of Zachary Investment Research. "And I'm sure they'll be wanting to get their money back some way."
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