Vonage: Glass half empty?

Vonage went public yesterday not with a bang but with a pschitt. In a first day of quotation, its price has fallen by 12.7%, by far the worst performance of technology IPOs over the last two years:

COMPANY DEAL VALUE FIRST DAY LIFETIME
Google $1.916.4 bln +18.0 PCT +335.30 PCT
Freescale $1.690.3 bln + 7.9 PCT +131.60 PCT
LG Philips $1.058.9 bln - 6.3 PCT + 41.90 PCT
Navteq Corp $1.012.0 bln +15.0 PCT + 99.10 PCT
Neurostar $ 695.8 mln +18.2 PCT + 51.20 PCT
Vonage $ 531.0 mln -12.65 PCT** - 12.65 PCT
Dolby $ 569.3 mln +35.0 PCT + 23.00 PCT
Spansion $ 567.2 mln +12.9 PCT + 46.40 PCT
Himax $ 510.6 mln - 2.8 PCT - 16.90 PCT
Suntech $ 455.1 mln +41.3 PCT +107.50 PCT

Source: Dealogic

Tech IPOs tend to succumb to the original sin syndrome and the first day of trading often (but not always) prefigures a longer-term performance. However, before one writes a sorrowful obituary for Vonage, consider the following:

• Even after this serious drop, Vonage is still valued at over 2.3 billion dollars, which represents a sales multiple of 8.5 (for 2005). And Vonage is still loss-making


• The market valuation achieved is close to twice the one forecast only last February


• The corporate story of Vonage is far from over. Many analysts, including me, thought that Vonage will not go public but will be acquired by one of the big telcos (existing and potential ones). This may still happen. Furthermore, the IPO renders feasible intermediate scenarios, such as a newcomer taking a strategic stake in Vonage, which remains listed.