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.
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
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
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