Vonage Ups IPO Ante


Nearly three months after filing an initial-public-offering prospectus with the Securities and Exchange Commission, Internet-phone giant Vonage Holdings Corp. finally priced its IPO Friday, hoping to raise $575.2 million-$647.1 million, more than twice the amount it had originally hoped to raise in February.

Vonage said it plans to be listed on the New York Stock Exchange under the symbol “VG.” No date has been set for the IPO.

In February, Vonage said it expected to raise about $250 million from the IPO, but it offered little detail as to how many shares would be offered or at what price.

Vonage now plans to offer 31.25 million shares (about 20% of its planned 155.7 million shares outstanding) at $16-$18 each. Including underwriter overallotments of about 4.7 million shares, the total amount to be raised is expected to be $575.2 million-$647.1 million.

At the $18 offering price, Vonage would be valued at about $2.8 billion.

Citigroup, Deutsche Bank Securities, UBS Investment Bank, Bear Stearns & Co., Piper Jaffray & Co. and Thomas Weisel Partners LLC are serving as underwriters.

Jackson Securities telecommunications analyst Greg Gorbatenko said the larger offering price should come as no shocker.

“It’s probably been well-received,” Gorbatenko said. “It’s been talked about for a while, and the analysts are no stranger to it. It’s a good story. It doesn’t surprise me at all.”

By increasing the size of the offering so substantially, Vonage has likely received strong interest from potential investors.

Vonage said it had about 1.6 million subscribers as of April 1, an increase of about 100,000 customers since February.

The company added that it spent $331.7 million on marketing during 2005 and the first three months of 2006, up from $56.1 million in 2004.

Vonage founder and chief strategist Jeffrey Citron will control about 48.4 million shares after the offering, or about 33% of its outstanding stock, making him the largest single shareholder.

Bain Capital LLC (8% of outstanding shares), Meritech Capital Partners (10%), New Enterprise Associates (19%) and 3i Group plc (8%) are other big holders and backers that previously helped Vonage to raise about $450 million since 2000.

Citron was fined $22.5 million by the SEC in 2003 relating to his involvement with online brokerages Datek Securities Corp. and Datek Online Holdings Corp. While Citron admitted no wrongdoing, he was barred from being associated with any securities broker or dealer.

Citron is not banned from running Vonage, but the voice-over-Internet-protocol provider conceded in the IPO filing that some financial institutions and accounting firms have declined to do business with Vonage because of Citron’s checkered past.

Vonage has grown rapidly since its inception in 2002. Revenue for the first nine months of 2005 was $174 million compared with $971,000 in 2002. But losses have ballooned at the same time, rising to $189.6 million in the first nine months of 2005 compared with a loss of $12.7 million in 2004.