Vonage won’t buy customer shares

Vonage is now saying it will not repurchase shares from customers who initially wanted to participate in its IPO but have been disappointed by its performance.

Multiple news outlets reported Wednesday that Vonage was not going to force customers to pay for the shares they reserved in the light of the 29% drop in share value of the IPO. But the company issued a clarification late Wednesday, saying customers will be expected to follow through on their stock purchases.

“Pursuant to the terms and conditions of our Customer Directed Share Program, if a customer was allocated shares in the Customer Directed Share Program, that customer is obligated to purchase their share allocation from the underwriters,” the statement read. “To be clear, we have not offered and are not offering to repurchase any of the shares of common stock from our customers.”

Vonage’s IPO has been called the weakest in recent history. Initially offered at $17, shares of Vonage traded this weak closer to $12. Concerns have been raised about its multi-million dollar ad campaigns – the company spent $20 million in on-line ads alone, according to TNS Media Intelligence – and the fact that profitability is not in sight, even as more competitors flow into the VoIP market.

The company had reserved up to 13.5% of its shares as an affinity offering for its 1.6 million customers, and said in its IPO prospectus that it would indemnify its underwriters against the liability of customers in the affinity program failing to pay for the stock they reserved.

On Monday, Vonage officials reportedly told CNBC that the company would repurchase the stock itself rather than risk alienating customers. According to reports from Wall Street, about 9000 customers took the stock offer, but as many as 7000 of those have yet to pay for their stock.