Vonage goes public Wednesday

Janet Babin May 23, 2006

KAI RYSSDAL: The technologically hip among us have been onto Vonage for a while now. But the company’s betting the investing public wants to get in on the action. Vonage does somthing called VoIP. Phone calls over the Internet, basically. At a fraction of what you pay Bell South or AT&T. The company’s going public tomorrow. Investors could make a tidy profit. And Janet Babin reports from the Marketplace Innovations Desk at North Carolina Public Radio, the company really needs the cash.

JANET BABIN: Ubiquitous commercials with a catchy tune have helped Vonage snare 1.6 million customers. But all that advertising can bleed a company’s coffers dry. In the first quarter, Vonage spent more than $88 million feeding the marketing beast.

Daniel Berninger is an analyst with Tier One Research. He says Vonage will likely use the IPO proceeds on more marketing if it wants to outpace rivals for new customers.

For investors, Berninger says the chance to buy Vonage stock could be a once in a lifetime opportunity — because the company has the potential to become the next Google or Yahoo:

DANIEL BERNINGER: What you’re tyring to figure out is: Is Vonage one of these real name-brand companies that will be around for a while, or does it have some sort of obstacle that’s going to shut it down?

In an unusual move, Vonage has set aside 14 percent of its 31 million stock shares for customers.

I’m Janet Babin for Marketplace.

As a nonprofit news organization, our future depends on listeners like you who believe in the power of public service journalism.

Your investment in Marketplace helps us remain paywall-free and ensures everyone has access to trustworthy, unbiased news and information, regardless of their ability to pay.

Donate today — in any amount — to become a Marketplace Investor. Now more than ever, your commitment makes a difference.