Vonage Underwriter Citigroup Initiates With 'Hold'

Vonage Holdings Corp. underwriter Citigroup Inc. rated the Internet-phone company ``hold,'' indicating the shares aren't worth buying even after they plunged by half since the initial public offering in May.

Potential lawsuits from the IPO and a free-month promotional offer are some of the factors that make the stock risky, according to Citigroup analyst Michael Rollins.

``Recent developments since the IPO could weigh on second- and third-quarter results and limit the level of upside potential for the stock,'' New York-based Rollins wrote in a report today. He put an $11 price target on the shares.

Vonage, based in Holmdel, New Jersey, sold shares to the public and to customers at $17 on May 23. They have tumbled 49 percent since to $8.60 today. Some Vonage customers who bought shares have refused to pay for them and at least nine lawsuits have been filed, with allegations including failure to disclose certain risks.

Citigroup managed the offering with UBS AG, Deutsche Bank AG, Bear Stearns Cos., Piper Jaffray Cos. and Thomas Weisel Partners Group Inc. The banks earned $31.9 million in fees from the IPO, according to the May 23 prospectus.

UBS spokeswoman Alison Chin and Bear Stearns spokeswoman Monica Orbe said they couldn't comment on possible coverage plans. Calls to Deutsche, Piper Jaffray and Thomas Weisel weren't immediately returned.

Vonage shares rose 1 cent at 1 p.m. today in New York Stock Exchange composite trading. The NYSE closed early ahead of the July 4 holiday tomorrow.

Source: Bloomberg