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Caveat Emptor

It sure is vogue to point at the Vonage (VG) IPO and let fly with the ‘I told you so’s’.

I’m angry though. Not at Vonage – I’m actualy impressed with their (really, their brokers) ability to get the deal done. What I am angry about is how some are now saying that the consumers who agreed to buy shares shouldn’t have to pay.

From IP Democracy, on Vonage pursuing customers for non-payment for issued IPO shares.

Memo to Vonage: Don’t do that. Not only will the 9,000 or so customers who purchased the stock because you pitched them via emails and voice mails quit your company (if they haven’t already), but the bad press is just not worth the cash.

This is totally ridiculous. Regardless of the IPO performance, these people are on the hook to pay up, just as they would be if they refused to pay their Vonage bill itself.

They didn’t purchase the stock because they were ‘pitched’ they purchased it because they either:

  1. Thought it was a good investment
  2. Greedily thought they could flip the shares for a profit.

In either case, these consumer stockholders should accept the outcome. If the ‘press’ was sensible they would be offering ‘bad press’ towards the customers refusing to follow through on a contract rather than the busted IPO Vonage story. I hope Vonage drills these non-paying folks to the wall, then drills the attorneys who inevitably will come after them.

Caveat Emptor.


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  1. Andrew,

    Following up on your comment posted on my item that you found “ridiculous,” I added an update to concede to your point of view…to a degree. It’s true that anyone looking to make a quick buck doesn’t deserve to be let off the hook.

    However, the hard cold reality is that it’s never good to sue your customers and perhaps Vonage should have foreseen this outcome before pitching its IPO to them. In a perfect world, Vonage is right and the customers trying to weasel out of their deals are wrong.

    But this isn’t a perfect world, and the press will eat Vonage alive…which will drive down the stock and, perhaps, trigger lawsuits. In the end, Vonage may end up worse off financially.

    Cynthia B.

    Posted by Cynthia Brumfield | June 1, 2006, 11:48 AM
  2. Realism vs. Idealism indeed. I tend to be the foolish realist. You are right, in the end Vonage may be worse off but at least they did the principled thing that their shareholders should expect.

    They won’t have to sue. They have a legal contract, they’ll just sic the credit agencies on them.

    It would be good to see the press cover the other side of the story, the one of deadbeat speculators, and not just cover the busted IPO.

    Thanks for commenting.

    Posted by Andrew Schmitt | June 1, 2006, 12:38 PM