And Now For The Vonage IPO

Vonage, the company that introduced a haunting jingle and low cost voice calls over the Internet to the masses is all set to go public. The company is likely to start trading tomorrow, according to news reports, despite some last minute doubts about its long term viability. The plan is to sell 31.25 million shares in the $16 to $18 range, which could put the value of the company at around $2.6 billion. The company, based in Holmdel, New Jersey- could raise as much as $493 million, some news reports suggest. That’s nearly double the number originally expected. But will the cash last?

“Right now it’s a perennial money loser. And the growing competition also makes life harder for Vonage,” Jon Arnold, of J Arnold Associates tells Reuters. It is an argument we have made time and again.

Seldom have more doubts been raised about any company going public. Almost free phone calling from Skype could KO Vonage’s plans, said Andy Kessler, who knows a lot about the technology stocks. Wall Street Journal reported on the growing number of customer complaints. Our analysis showed them no money anytime soon, especially as the competition from the cable companies intensifies.

In anticipation of this IPO, the company has been spending aggressively in order to add new subscribers. Telegeography, a research firm, says that there were 5.5 million subscribers at the end of first quarter 2006, versus 1.9 million at the end of the first quarter last year. Stephan Beckert points out that, that “Vonage still rules the roost in terms of subscriber numbers–in fact, in a reversal of recent trends, they put a bit of distance between themselves and Time Warner in the first quarter.” Unfortunately, in terms of revenues, Vonage has had to take a back seat to its much bigger rivals.

How this IPO turns out we shall see tomorrow. How the stock performs in the weeks and months to come..!

From the archives:
Cablevision is Machiavellian Move
Will SkypeFree KO Vonage IPO?
Cable VoIP, Hotter Than Ever
Vonage Churn, Investor Heart Burn
Vonage Files for $250 Million IPO