The company is seeking proceeds of between $500 million and $562.5 million, according to its filing with the Securities and Exchange Commission on Friday. With 155.7 million shares outstanding after the IPO, Vonage would gain a market capitalization of between $2.5 billion and $2.8 billion. The valuation would be comparable to the $2.6 billion its competitor Skype received when it was.
However, Vonage noted in its filing that itsand the NASD could dampen investors' enthusiasm.
"There is a risk that some third parties will not do business with us, that some prospective investors will not purchase our securities or that some customers may be wary of signing up for service with us as a result of the past SEC and NASD settlements and related allegations against Mr. Citron," according to the SEC filing.
Jeffrey Citron, the company's founder and chairman, reached a settlement with the two agencies, without admitting or denying guilt, over allegations that he engaged in fraudulent use of the Nasdaq's Small Order Execution System while at Datek Securities and Datek Online Holdings. Citron allegedly attempted to hide such transactions by creating fictitious books and records and filing false reports with the SEC.
Citron, who serves as Vonage's chairman and chief strategist, is its largest investor with a 41 percent stake in the company. After the IPO, his stake will fall to 33 percent, and carry a value of approximately 872 million. Citron has invested $450.5 million in the company since its inception.
In addition to his Vonage holdings, Citron received a base salary of $400,000 as the company's chief executive last year, as well as a cash bonus of $540,000, according to the company's SEC filing. Michael Snyder, formerly the president of Tyco International subsidiary ADT Security Services, became CEO of Vonage in February.
The company has posted increasing losses over the years and anticipates the trend to continue, despite rising revenue. During the first quarter that ended in March, Vonage's revenue climbed nearly threefold to approximately $119 million, up from $41 million a year earlier. Vonage's net loss, however, also rose to $72.8 million in the quarter from $60 million in the same period a year ago.
"We have incurred losses since our inception, and we expect to continue to incur losses in the future. For the period from our inception through March 31, 2006, our accumulated deficit was $455.1 million," according to the filing. "Our net losses have been driven principally by marketing expense."