Big Vonage investors put off registering of shares
Major shareholders owning three-quarters of Internet phone company Vonage Holdings Corp. are holding off on a regulatory step that would make it easier to sell their stock, which has plunged more than 60% since a high-profile initial public offering in May.
Vonage announced Tuesday that investors with 115 million shares, including 51 million held by company founder Jeffrey Citron, had agreed to amend a shareholder rights provision that would have required the company to register the investors’ stock with the Securities and Exchange Commission.
The registration of shares is necessary for an investor to be able to sell them on the open market.
The agreement to forgo the mandatory registration comes just a week before the end of a six-month “lock-up” that prevented stock sales by company insiders and pre-IPO backers who helped fund the vast marketing blitz behind Vonage’s explosive growth.
These venture capital firms include New Enterprise Associates, 3i Group, Meritech Capital, Institutional Venture Partners and Bain Capital.
It wasn’t immediately clear whether Tuesday’s announcement was meant as a signal that Vonage’s major investors, by voluntarily tying their hands, believe the market price for their shares has been beaten down below the company’s worth.
New Enterprise and Bain did not respond to requests for comment.
But even if it was intended that way, Vonage’s shares dipped after the announcement. The stock ended the day up 3 cents at $6.56.
Though Vonage is still growing quickly, its performance has been hit by increasing competition from cable TV companies offering phone service using the technology called VOIP, short for voice over Internet protocol.
Two weeks ago, Vonage posted a smaller-than-expected loss of $62 million for the third quarter but reported that subscribers closed their accounts at a faster pace. The report also revealed slower growth in signing up new customers.
As a result, the overall customer base grew by just 205,000 lines during the quarter, for a total of 2.06 million at the end of September.
The gain was far smaller than in the first half of the year, when the customer base grew by a quarter of a million in the second quarter and more than 325,000 in a blockbuster first quarter.
