Update: I chickened out. As the commenter notes, this was gambling, not investing, and I wasn’t sure I had an edge. With a bad story in this morning’s NYT, a discouraging update from theflyonthewall.com, and pricing in the middle of the indicated range at $17, it suddenly didn’t look like there was a reasonable balance between risk and reward, especially since I was sure to get only 1300 shares if the deal proved really hot but was likely to get stuck with 5000 if it turned cold. So I just went to the website and cancelled my offer before the allocations were posted.
Second update Dodged a bullet. The stock issued at $17, opened at $16.30, and is now below $15.
The SEC registration for the Vonage IPO goes effective today (Tuesday) presumably just after the NYSE close at 4 pm EDT. If you’re a Vonage customer and have signed up for the directed-share program, you have exactly one hour after the registration goes effective to cancel your order, or you’re stuck: you have to pay the offering price for however many shares (up to the number you ordered) Vonage decides to sell you, at whatever price, within the posted range of $16-18 per share, it decides to set.
I’m still in, but wavering. Today I got a call from a broker at one of the underwriting firms telling me to avoid the deal. The combination of the softening of the market and Skype’s offer of free VOIP service for the rest of the year has investors spooked, said the broker, and in the long run Vonage doesn’t figure to make money selling what will become a commodity service.
On the other hand, Barron’s on-line subscription service flyonthewall reports that the deal is “many times oversubscribed,” with enough demand from the Vonage customer segment to make it go even without Wall Street money. Flyonthewall also reports that Smith Barney, the lead underwriter, plans to stick within the indicated price range. (If the deal is really hot, presumably toward the top of that range.)
Of course, that may not be right. If other Vonage customers did what I did — sign up for the deal just to keep their fingers on their numbers, without any commitment either legal or psychological — then there may be a rash of post-registration cancellations.
Worse, if a large number of them are getting in, as I am, just for a quick trade, we may all be looking around on Wednesday for a greater fool to sell to, only to discover that folly has its local maximum somewhere between our ears. On the other hand, if the institutional fund managers are too chicken not to own the stock in case it’s the next Google, while most of the customers are true believers rather than wannabe arbitrageurs like me, we could get a very nice pop before reality takes hold.
At the moment, I’m inclined to take the gamble. But if I do, and if I get some stock, I’m selling out Wednesday morning for whatever it will bring. I’ll take whatever profit I can, or I’ll take my lumps. But I’m not owning this dog a minute longer than I have to.