May 8, 2006 11:21 AM PDT

Vonage reserves IPO shares for customers

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Internet telephony provider Vonage said Monday that it will set aside shares of common stock for eligible customers participating its initial public offering.

Customers must meet strict eligibility criteria to participate in the Directed Share Program, including the following: They opened accounts with Vonage on or prior to Dec. 15, 2005; maintained their accounts in good standing through Feb. 1, 2006; are U.S. citizens; reside in the U.S. when the offering closes; and have a valid Social Security number.

Vonage on Monday sent e-mails to its customers notifying them of the Directed Share Program and directing them to a Web site for more information.

"Because much of our success is attributable to our customers, we have asked the underwriters of the IPO to reserve shares of common stock for sale to certain Vonage customers," the company said in the letter.

Interest among institutional investors for shares in the Vonage IPO appears to be strong. In February, the company had said it hoped to raise about $250 million from the IPO. Then in April, Vonage more than doubled that expected amount to between $575.2 million and $647.1 million.

In total, Vonage is hoping to offer 31.25 million shares at a price between $16 and $18 each. At the $18 offering price, Vonage would be valued at about $2.8 billion.

Vonage offers a service that turns broadband connections into telephone lines by chopping voice signals into Internet protocol packets and sending them over the Internet. Its Internet telephony service, which now has 1.6 million subscribers, gives people an alternative to traditional home phone lines from Verizon Communications or AT&T.

Not only is Vonage competing against traditional phone companies, but it also competes with a slew of other telephony services, including cell phones, cable telephony from companies like Comcast and Time Warner, and free Internet calling services from companies such as Yahoo, AOL and eBay's Skype.

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Vonage Holdings Corp., IPO, common stock, telephony, IP telephony

5 comments

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why can't resident aliens participate in IPO?
I am a resident alien, customer of Vonage, and I am utterly disappointed that I am not allowed to participate in the IPO. In fact I will cancel my service today and get another VOIP provider.
Posted by lat3rintheday (3 comments )
Reply Link Flag
IPO for us citizens only?
I support your view.

I am willing to bet that a substantial part of vonage customers are resident aliens. I expect vonage to change that requirement to all those legally resident in this country. Otherwise, it would be poor foresight on its part and vonage is likely to see a spike in the number of cancellations.

What with companies like sunrocket and viatalk offering one year free with one year purchase, Vonage has stiff competition. This straw only provides the trigger for cancellations.

-Tapas
(US resident alien)
Posted by tapaskm (10 comments )
Link Flag
I agree
I m also very disappointed to see only US citizens are allowed to participate in Vonage IPO.
Posted by 206538395198018178908092208948 (141 comments )
Link Flag
OUTRAGED TOO
My husband and I have a vonage account, his name to on the establish credit. I am a us citizen, he is a legal resident. Great that they are offering the ipo to customers BUT IT SICKENS me that my husband and I (customers for over a year)cannot participate in this ipo. We have over the past year sold by word of mouth several people on vonage. I used to work in the securities industry and again I am so SICKENED that we are excluded from this opportunity. If we are not offered the same opportunity, we will by word of mouth.....let our sentiments be known to anyone who brings up the company name whether we know them or not.
Posted by aarrior (1 comment )
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