Regulators, Lawyers Swarm Vonage
A couple more class action lawsuits -- and an investigation into potential short-selling violations -- have been added to the mix of the troubled IPO, whose shares are down 30 percent from the offering price. On Wednesday, a class action lawsuit was filed against the VOIP service provider for the way it sold IPO shares to its customers. At that time Vonage said it couldn't comment as it hadn't received a copy of the lawsuit. (See Vonage Class Action: What's the Damage? and Vonage Clarifies Share Policy.)
Now Vonage says it has "become aware of two putative class action shareholder lawsuits" filed against the company, some of its officers and/or directors, and its underwriters. (See Vonage Faces Lawsuits.)
The lawsuits "allege, among other things, that Vonage omitted and/or misstated certain facts concerning the IPO's Customer Directed Share Program. One of the complaints additionally claims that the IPO prospectus allegedly contained misrepresentations or omissions concerning various Vonage products, including facsimile transmission capability."
Vonage says it hasn't been served with legal papers pertaining to either lawsuit, and won't comment on these or any other legal action. It does, though, "plan to comment on these or any similar lawsuits that may be filed against the Company" and will "contest the allegations vigorously and address them through the appropriate legal process."
On the other side of the fence, Vonage may get some help from the New York Stock Exchange (NYSE) , which is looking into charges that short-sellers may have artificially manipulated the share price downward.
The Wall Street Journal reports that New York Stock Exchange regulators have sent letters to a number of Wall Street securities firms regarding trading in Vonage stock. The regulators want to know if traders may have violated rules related to the short-selling of the VOIP firm's stock by not having access to the shares needed to settle their transactions -- a technique known as naked shorting.
According to the Journal, 5 million of the 33.8 million Vonage shares sold on the company's first day of trading were sold short, and the NYSE regulators are concerned the steep decline in Vonage's share price might have been manipulated.
Vonage's share price closed at $11.79 on Thursday, but was up 32 cents, nearly 3 percent, to $12.11 in pre-market trading today.
— Ray Le Maistre, International News Editor, Light Reading