Prior to the Company's Initial Public Offering ("IPO") on May 24, 2006, the Company had spent hundreds of millions of dollars to market its services to potential customers. However, the Complaint alleges, both the Company and Company insiders, who had invested hundreds of millions of dollars of their personal funds in the Company, were losing money. According to the Complaint, these Company insiders, desperate to execute an exit strategy for themselves, embarked on an illegal course of conduct to sell shares of the Company in a public market.
The Vonage S-1 form, made it very clear there is strong evidence for a substantial doubt about the company's ability to continue as a going concern. If you bought shares after reading the prospectus, you have no cause for complaint. And if you bought shares without reading the prospectus, you also have no cause for complaint.
Of course the real reason for the lawsuit is not that Vonage and certain named officers and underwriters allegedly engaged in "illegal course of conduct to sell shares of the Company in a public market". The goal of the lawsuit is to collect legal fees on behalf of Motley Rice partners.
My guess is that litigation and indemnification around the IPO will end up costing the company about a tenth of the IPO proceeds, so around $53 million total. If Vonage ends up granting rescission rights to IPO purchasers, it will be much more expensive.