Errors may give Vonage customers IPO loophole

In a document filed with the Securities and Exchange Commission on May 23, the day before Vonage's stock was sold publicly on the New York Stock Exchange, the company said that the initial e-mail it sent to customers about the directed-share program failed to include an active hyperlink to the most recent prospectus. It also admitted that a voice mail it left customers did not include the name and address of a person from whom a prospectus could be obtained, another violation of SEC rules.

Vonage admitted that the e-mail and voice mail issues could have repercussions.

"Recipients could seek to recover damages or seek to require us to repurchase their shares at the IPO price," the company said in the filing.

News that Vonage made errors in informing potential investors in its IPO is just the latest in a long list of hiccups the company has experienced since its stock started trading publicly on May 24. From the beginning, it was apparent the IPO was on shaky ground as the company's stock dropped almost 13 percent on its first day. The sell-off has continued with shares declining more than 30 percent since last week.

The fact that Vonage has admitted to problems with how it communicated information about the share program could come back to haunt it; some shareholders this week have already said they won't pay for their shares.

While the company has said it doesn't want to alienate its customers, on Wednesday it said that it expects anyone who signed up for shares to pay for them.

Nina Shreiber, a 29-year-old talent manager in New York, is one of several Vonage customers claiming to have experienced a glitch when signing up for shares of the stock before the IPO. Shreiber said that she tried to purchase 5,000 shares the night before the shares started trading, but when she reached the end of the registration process on the Vonage IPO site, she got a message stating she hadn't been allocated any shares and owed no money.

The next day she checked the site again and discovered she had actually been allotted 1,300 shares and now owed $22,000. Shreiber said she is working with Smith Barney, the brokerage firm handling her account, to resolve the issue.

But she said that the glitch she encountered, along with the company's admission that it did not appropriately communicate certain items to potential shareholders, shows how disorganized and ill-prepared Vonage was in offering IPO shares to its customers.

"If you're a company that is going public, you'd think you'd have all your T's crossed and I's dotted. Clearly they didn't," she said. A Vonage representative on Thursday declined to comment on the glitch.

Bloomberg News was the first to report Vonage's disclosure about the e-mail and voice mail issues.