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Shares in Vonage, the pioneering US-based VoIP (Voice over Internet Protocol) telephony provider, are expected to begin trading on Wednesday on the New York Stock Exchange following the company’s initial public offering.
Vonage has built a small but loyal customer base of subscribers who have signed-up to take advantage of its cut-price broadband phone service and was expected to raise about $550m when the share offering was priced last night.
The offering, which comprised 31.25m shares or about 20 per cent of the company, was oversubscribed and was expected to be priced towards the top end of its indicated $16-$18-a-share price range, boosted in part by a move by Vonage to set aside about 13.5 per cent of the offering for its own customers.
At that price, the New Jersey-based company would be valued at about $2.75bn and the stake held by Jeffrey Citron, Vonage founder and chairman, would be worth nearly a billion dollars.
Mr Citron, who stepped down as chief executive in February (when Vonage named Mike Snyder, a former Tyco executive, to the job), owned about 53.7m shares or 41 per cent of Vonage’s common stock before the offering.
Based on a $17 share price, Mr Citron’s stake will be worth about $913m. After the IPO he will own about a third of the company.
Other major shareholders include Britain’s 3i Group, Bain Capital, Institutional Venture Partners, Meritech Capital Partners and New Enterprise Associates.
Vonage, which has lost a total of $467m since being founded in 1995, has been growing rapidly in recent years, boosted by an aggressive marketing campaign and growing customer dissatisfaction with high priced calling plans from the traditional telecommunications carriers.
The company spent $88m on marketing in the first quarter and recorded revenues of $118.9m. It has about 1.6m customers.
Cable companies and independent broadband VoIP providers such as Vonage have succeeded in luring away a small but growing percentage of the traditional telecoms carriers’ customers with cut-priced calling plans and the numbers are expected to grow rapidly over the next few years.
Six major Wall Street banks underwrote the IPO, including Citigroup, Deutsche Bank Securities, UBS Investment Bank and Bear Stearns.