At the end of the second day of trading Vonage (VG) closed at $13.00 with over 11.3 million shares traded today; down 24.6% from the IPO price. There is some interesting and insightful commentary coming out:
Andy Abramson, VoIP Watch: My Thoughts on The Vonage IPO
So really, this reaction to the stock price is not a reflection of how VoIP will do, for VoIP, especially with new and different services coming on line every day that can only be delivered by IP will do very well in the hands of companies with real leadership and vision, not just a sales model that costs more to acquire the customer than will ever pay back.
No, this reaction is a show of no-confidence by Wall Street in the company, their leadership and their approach to business. Nothing more. Nothing less.
Jon Arnold was interviewed by ROBTV (a Canadian business channel); this link will work until May 31. Jon points out that, whereas the legacy telco and cable competitors at least have a customer base to whom they can market a VoIP service, Vonage needs to recruit a customer base ... thus, the high marketing costs. Well worth a listen for an overview of Vonage and its positioning.
Tom Evslin brings his insight as a former CEO of company that went through an IPO in the Bubble 1.0 era to two posts: Vonage IPO - When the Crowd Is Always Wrong and Vonage IPO - How The Bankers May Make a Bundle More Despite the Bust. Most interesting are his comments about "flipping".
Andy Kessler follows up his guest post a week ago on GigaOm: Vonage Sucker Punch. "Here's how not to do a deal. Citigroup raised the number of shares in the deal, but not the price. Bad move - it signaled some weakness...." Read on.
Mathew Ingram: Use VoIP to Call Your Broker and Sell. But he recommends using Skype to call your broker -- "it's cheaper".
In summary:
- It's the VoIP business model, not the underlying VoIP business technology, that needs attention. Once more an implicit validation of the business model described by Alec Saunders' Voice 2.0 Manifesto.
- Trading at this point appears to be unrelated to any business fundamentals but rather to the psychology and needs of the financial market players.
- There will be a continuing squeeze on Vonage's margins as their competitors come in with lower price offerings. Didn't Skype say "free within North America" to year end?
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