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May 24, 2006

Vonage: I Guess We're Both Right

Tim Mullaney

Skeptics -- present company included -- thought the Vonage IPO was a dud. Some of us thought it would never get done, a view that gained currency even as bankers were out selling the $531 million deal that valued the Voice-over-Internet phone provider at nearly $3 billion. Others thought it was a sign that the Republic was in danger, that its very presence on Wall Street is the first sign of a bubble where money-losing, poorly situated companies facing competition they logically shouldn't overcome can and do go public anyway.

Bankers apparently were believers, though they haven't said anything much in public. They said they could sell it, and they did. It got done.

The market, however, gets the last word, and its first comments seem strikingly sensible. Vonage shares traded down 4% from the $17 a share IPO in early trading and are at $16.29 as I write. Initial impression: It was a doable deal, but not a hot one. No one is chasing this one up the ladder, and at least nobody is infected with euphoria that's not backed up by the fundamentals. So we're both right.

Tell me why not, readers. Did anyone reading this buy shares in this money-losing company with both real and future competitors who are much bigger, richer and better known? What were you thinking? I'll include your comments in our piece later today about the deal.

10:03 AM

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