Vonage IPO: Customers to the Rescue

Web-calling service provider Vonage will sell some of its IPO shares to its own users. That's a smart move, intended to keep Vonage's IPO from fizzling.
Olga Kharif

Web-calling service provider Vonage will be making a chunk of its IPO shares available to its own customers. As much as 15% of the shares issued during the IPO, expected any day now, will be sold to users who've signed up for service before Dec. 15, 2005.

That's a super-smart move, especially at a time when many industry insiders increasingly question Vonage's prospects -- and the prospects of the company's IPO. Getting customers involved can help Vonage build up more buzz around its public offering and to make sure its shares trade up, says IPO expert Tom Tauilli.

What's more, such an offering can help Vonage, whose customer churn has gone up a tad recently, amidst increasing price competition, to effectively lock in its user base, says Jerry Kaufman, of consultancy Alexander Resources. With the big portals and cable companies pushing into the Web calling space, and with service prices falling, Vonage needs all the help it can get to raise funds.

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