MyMomsBox
06-15-2006, 10:23 AM
By Rebecca Barr
June 15 (Bloomberg) -- Vonage Holdings Corp., a provider of
Internet-based phone service that went public last month, was
downgraded to ``sell'' by Pali Research, two weeks after the firm
upgraded the stock.
Pali analyst Richard Greenfield cut his rating from
``neutral'' after he discovered Vonage is offering existing
customers a discount rate of $19.99 a month to stop them from
switching carriers. The Holmdel, New Jersey-based company charges
new customers $24.99 a month.
Vonage shares today dropped as much as 3 percent to their
lowest level since the stock first started trading on May 24.
The promotion indicates Vonage feels under pressure to add
customers to bolster the shares and caused Pali to change its
view on the stock, Greenfield said.
``It is increasingly apparent that Vonage is struggling to
drive subscriber growth following the IPO,'' Greenfield said in a
note to clients today, after he called the company to cancel his
Vonage service and was offered the lower-priced deal.
The customer service representative also offered to waive
the fee usually associated with changing price plans, Greenfield
said.
Shares of Vonage, down 41 percent since the public offering,
fell as much as 31 cents to $9.89 and traded for $10.12 as of
10:02 a.m. in New York Stock Exchange composite trading.
Company spokeswoman Brooke Schulz didn't immediately return
a call seeking comment.
Advertising Costs
Vonage sold shares for $17 apiece in its IPO, raising $531.3
million to help finance soaring marketing costs. Advertising
expenses jumped 59 percent to $88 million in the first quarter,
according to regulatory filings.
The company, which has racked up a total of $361.2 million
in losses, attracted 1.6 million subscribers by being among the
first to offer Internet phone service. Vonage also faces a class-
action lawsuit over claims it violated securities laws when it
pre-sold 13.5 percent of its stock offering to its customers.
Motley Rice LLC filed suit against Vonage June 2 in the U.S.
District Court in New Jersey, alleging that the company broke
NASD rules by pre-selling the shares because there wasn't enough
demand for institutional investors, according to the Mount
Pleasant, South Carolina-based law firm.
Greenfield earlier this month had raised his rating on
Vonage to ``neutral'' after the drop in the shares. In a note
before the IPO, he said the stock should have been priced at or
below $10 to generate a 15 percent one-year return for new
investors.
--Editor: Sondag (ekm)
June 15 (Bloomberg) -- Vonage Holdings Corp., a provider of
Internet-based phone service that went public last month, was
downgraded to ``sell'' by Pali Research, two weeks after the firm
upgraded the stock.
Pali analyst Richard Greenfield cut his rating from
``neutral'' after he discovered Vonage is offering existing
customers a discount rate of $19.99 a month to stop them from
switching carriers. The Holmdel, New Jersey-based company charges
new customers $24.99 a month.
Vonage shares today dropped as much as 3 percent to their
lowest level since the stock first started trading on May 24.
The promotion indicates Vonage feels under pressure to add
customers to bolster the shares and caused Pali to change its
view on the stock, Greenfield said.
``It is increasingly apparent that Vonage is struggling to
drive subscriber growth following the IPO,'' Greenfield said in a
note to clients today, after he called the company to cancel his
Vonage service and was offered the lower-priced deal.
The customer service representative also offered to waive
the fee usually associated with changing price plans, Greenfield
said.
Shares of Vonage, down 41 percent since the public offering,
fell as much as 31 cents to $9.89 and traded for $10.12 as of
10:02 a.m. in New York Stock Exchange composite trading.
Company spokeswoman Brooke Schulz didn't immediately return
a call seeking comment.
Advertising Costs
Vonage sold shares for $17 apiece in its IPO, raising $531.3
million to help finance soaring marketing costs. Advertising
expenses jumped 59 percent to $88 million in the first quarter,
according to regulatory filings.
The company, which has racked up a total of $361.2 million
in losses, attracted 1.6 million subscribers by being among the
first to offer Internet phone service. Vonage also faces a class-
action lawsuit over claims it violated securities laws when it
pre-sold 13.5 percent of its stock offering to its customers.
Motley Rice LLC filed suit against Vonage June 2 in the U.S.
District Court in New Jersey, alleging that the company broke
NASD rules by pre-selling the shares because there wasn't enough
demand for institutional investors, according to the Mount
Pleasant, South Carolina-based law firm.
Greenfield earlier this month had raised his rating on
Vonage to ``neutral'' after the drop in the shares. In a note
before the IPO, he said the stock should have been priced at or
below $10 to generate a 15 percent one-year return for new
investors.
--Editor: Sondag (ekm)