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Steve Rosenbush, writing for BusinessWeek, says:

[Vonage] let customers "purchase" shares in the IPO without putting any money down, with the understanding that they would pay up a few days later... Now that decision is turning into a problem for Vonage (VG), its underwriters, and the customers who agreed to buy stock in the offering. Shares in the company started trading May 24... Since then, the price has tumbled 26%...

One big question: Will customers in fact pay up. Another is whether Vonage will try to pressure them, which could alienate the very people it depends on for its torrid growth... Its amended prospectus, filed with the Securities & Exchange Commission May 24, says the company won't make underwriters Citibank (C), UBS (UBS), or Deutsche Bank (DB) pay for shares that customers reserved and didn't purchase... The filing said up to 15% of all shares could be at risk.

Interesting that this was predicted by a Seeking Alpha contributor. Sure enough, the WSJ (paid sub. req'd) reported today:

If the underwriters seek indemnification, Vonage would likely have no legal standing to sue the investors, according to experts. But the underwriters do have that recourse and could decide to pursue it instead of seeking indemnification.

Vonage declined to comment, citing a legally imposed quiet period following the IPO.

But CNBC yesterday reported Vonage issued the network a statement on Sunday stating that it wanted to avoid "alienating" its customers. If "certain" customers who refused to buy the shares didn't pay, Vonage expects "to repurchase shares from the underwriters if necessary," CNBC reported.

What a mess.

Let's call this the Reverse Peter Lynch Theory. Sure, buy stock in companies that you're a customer of. But if you're a company, never sell stock directly to your own customers in an IPO.

Source: Lesson from Vonage: Don't Sell Stock to Your Own Customers (VG)