VOIP services

Vonage Targets $500M From IPO

VOIP services specialist Vonage Holdings Corp. (NYSE: VG) plans to net nearly $500 million from an IPO on the New York Stock Exchange (NYSE) that would value it at around $2.65 billion, according to documents filed today with the Securities and Exchange Commission (SEC) .

The documents show that Vonage, which has been skirting around the IPO process for months, plans to float 31.25 million shares of common stock at an average price of $17 each (setting a range of $16-$18), which would raise $531.25 million, more than double the amount it was previously aiming to raise.

After costs, Vonage reckons it will net $493.7 million, which it will use "to fund the expansion of our business, including funding marketing expenses and operating losses." The company will trade under the symbol VG. (See Vonage Files for $250M IPO and Vonage Hearing Buy-Out Bids.)

With those shares accounting for 20.1 percent of the company's total outstanding stock, an IPO at $17 would value Vonage at just over $2.6 billion. That's mighty close to the sum eBay Inc. (Nasdaq: EBAY) paid for Skype Ltd. , which today said it had reached 100 million users. (See EBay Buys Skype for $2.6B and Skype Hits 100M.)

The $17 price is the midway mark of Vonage's current share price range. "We currently expect the initial public offering price to be between $16.00 and $18.00 per share," notes the filing. Should the initial price be higher or lower, Vonage notes that "a $1 change in the initial public offering price per share would change the expected net proceeds by approximately $29.4 million."

No date was given for the first day's trading, though the document notes that the IPO should take place "as soon as practicable after this Registration Statement is declared effective."

The filing shows that Vonage is growing rapidly. Its revenues in the first three months of 2006 totaled $118.9 million compared with $40.7 million in the first quarter of 2005. But the company's costs doubled in the same period, from $101.3 million in the first three months of 2005 to $201.3 million in 2006, giving the company a bigger net loss of $72.8 million during the 2006 first quarter compared with $60 million in 2005.

Much of the company's costs comes from its marketing expenses as it tries to build as big a customer base as it can in the face of growing competition, and the company warns potential investors that further net losses are likely. "We intend to continue to increase our marketing expense, and we may continue to generate net losses for the foreseeable future."

Vonage ended March 2006 with 1.6 million subscribers, up from 640,000 a year earlier. It employs a little more than 1,400 staff. (See Vonage Exceeds 1.5M Lines.)

— Ray Le Maistre, International News Editor, Light Reading

voyce_overipee 12/5/2012 | 3:55:41 AM
re: Vonage Targets $500M From IPO Wow. I guess the bubble-times really are back.
Evidence is growing.

Exhibit A: Skype has virtually no revenues, or assets, but at least they have 50-100M customers (how loyal?) and it gets $2B on future earning hope/hype.

Exhibit B: Vonage has 1400 employees for only 1.6M customers, spends more than they make, and says "We intend to continue to increase our marketing expense, and we may continue to generate net losses for the foreseeable future." And they should be valued as if they were successful?
And what the heck do the 1400 employees all do? That's 1 employee per 1100 phone lines. It's not like they need linesmen. At that rate they could use old-fashioned cord switchboard operators to plug patch wires together to "connect" calls.
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