Two Against Vonage
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Not only is Vonage facing a growing class action lawsuit, it's facing Wall Street probes.
Kahn Gauthier Swick LCC has joined a class action lawsuit against Vonage over its ill-fated IPO. While refusing to comment on the specifics, the Internet phone company said it will mount a vigorous defense.
Vonage will "contest the allegations vigorously and address them through the appropriate legal process," according to a statement.
Realizing there could be further legal tangles, Vonage said it would not comment on these two lawsuits "or any similar lawsuits that may be filed against the company."
Kahn Gauthier Swick LCC claims Vonage violated federal security regulations by "publishing a materially false and misleading" registration statement and prospectus.
Earlier this week, an Atlanta, Georgia law firm filed a class action lawsuit in New Jersey federal court alleging Vonage mistakes and federal securities violations cost investors nearly $200 million.
In the lawsuit, Motley Rice LLC charged Vonage and the IPO underwriters unreasonably turned to customers of the VoIP service.
Vonage customers were "improperly crammed into the IPO regardless of their suitability," claimed the lawsuit. IPO underwriters also failed in their oversight duties, violating other securities rules.
Stuart Guber, a Motley Rice attorney assigned to the class action case, said hundreds of Vonage customers are asking to be part of the lawsuit. Guber believes all could receive a refund on their stock purchases.
In a related development, two Wall Street probes are under way regarding the Vonage IPO, according to The Wall Street Journal.
Securities dealers have until June 21 to answer a letter containing questions whether financial firms promoted short sales of the stock. Investors selling short bet they can sell the stock now and buy it back later at a lower price.
Such practices could account for the steep decline in share price.
While NYSE regulators would not comment on any ongoing investigation, sources confirmed to internetnews.com the National Association of Securities Dealers (NASD) is questioning the stock's activity.
Gruber, who participated in past securities cases, said Vonage could face fines.
Before Vonage launched its IPO last month, it gave customers a chance to buy shares at $17. Soon after going public, shares of the Internet phone service dropped to as low as 11.52. (The stock closed Thursday at $11.79.)
After the freefall and faced with grumbling investors, Vonage emphasized this week those customers who ordered stock must pay up. The company, in a statement, also denied it plans to refund investor money.