Vonage Bankruptcy (hoo-hoo, hoo-hoo-hoo)

A little squib of an article in the Boston Globe (from Bloomberg) reported the other day that Vonage "the worst performing US initial public offering in the last year may go bankrupt by 2009."

Well, as an alumna of Genuity, the worst performing US IPO of its year, and I believe the worst IPO ever up to that time. (I might just be bragging here), I can sympathize with the Vonage folks. (And did I mention that we went bankrupt, too. How fun is that?)

The warning came from Citigroup, which was a comanager of the IPO, and which drastically downgraded the stock. IPO comanager Bear Stearns had already downgraded it. Funny thing, Bear Stearns was involved in the Genuity IPO, too.

And both Vonage and Genuity were in the telecommunications business. And we both did Voice Over IP.

Maybe we're related?

Don't know about Vonage's IPO other than what you could see from the outside, but here's an inside peak at Genuity's fabled IPO.

The market was getting a tad wobbly mid-way through 2000, but "we" were hell-bent on an IPO. Actually "we" maybe weren't so much as our parent company Verizon was. For some tangled regulatory reasons, they had to get rid of us to consummate the marriage of Bell Atlantic and GTE. Why just spin us out when you could grab a little cash with an IPO?

In any case, the company was gripped with IPO fever. If we all weren't going to get rich, there was sure a potential to get more comfortable. Because we were kinda-sorta the phone company, everything was pretty hierarchical. Option amounts got really interesting at the Director level. I was a Director.

Options aside, a lot of folks just didn't want to be left behind on the friends and family offering.

Not everyone, of course, got in. (A warning in the newspaper a few days before the IPO said that, given the convoluted structure of Verizon and Genuity, "this one's for the pros.") The cooler heads took a pass. The hotter heads took a second mortgage. (I saw several second mortgage applications on the fax machine in the run up to the day we could put our orders in.)

I decided that I couldn't very well be a Director, with twenty people on my team, and not have some faith in the company. I sat one morning with my friend Joan and we both decided that the amount we were each prepared to lose was $11,000 (11 shares at the pre-IPO price).

Well, good thing I was prepared to lose $11K.

By the closing bell on opening day, our options looked like they weren't going to ever be worth the paper they were printed on. And you tell just looking at people's faces which side of the friends and family divide they were on. Relief (nice people who didn't invest); smirk (not-so-nice people who didn't invest); non-chalance (those in for a small, manageable amount); and sheer panic and/or rage (those who'd mortgaged the farm or their kids college tuition). I knew a couple of couples, both working for Genuity, who put in the max. For a lot of people, the personal distress was compounded by the fact that they'd gotten friends and family involved. (Hey, what's a friends and family for, anyway?) As one of my friends told me, "My father-in-law didn't like me to begin with."

I knew there weren't enough office supplies in the building that people could cadge to make up for their losses.

On IPO day, there was a big party scheduled for our quad: champagne, barbecue, big cake. They also had gift packs for us that contained a disposable camera, a fleece throw, a foolscap (how appropriate), and an IOU for a t-shirt. Well, people were looking for an IOU, alright, but it wasn't for a lousy t-shirt.

Part way through the party, when it appeared that the gift packs were going to run out, the crowd got really ugly. People were lunging over the tables to grab extras, swearing at the young marketing folks who were responsible for giving them out, and acting in general like they were trying to grab the struts of the last American helicopter out of Saigon.

Our hangdog execs tried to put a smiling face on things. (It didn't work.)

By the next day, people were making chat room death threats on our CEO, calling their lawyers to claim that Bear Sterns - which had to call all IPO participants on the eve of the IPO to confirm their order - had pressured them and/or lied about their obligation at that point. (I may have been a little bit lied to. When the person who called me told me what the opening price was  - a number less than we'd been told - I asked her if that meant that the book hadn't been sold. She denied that had anything to do with it. Hmmmm.) In any case, since my investment was minor, and I was prepared to lose it, I wasn't one of those clamoring to rescind my order. My choice. My dumb decision.)

I remained at Genuity for two wildly entertaining (if somewhat tortured) post-IPO years.

One of the highlights of those years came when I was named a Genuity i-Leader, and sent to the sales winners' week at a swank, no expense spared resort in Lanai, Hawaii. I never knew whether 50 of us (plus traveling companion) from outside of sales got to go because there weren't enough sales guys who made plan, or whether they'd always intended to have some non-sales awards.

What I did know was that, sitting with my friend Joan - another i-Leader - at one of the week's events, we did a mental calculation of what this whole thing was costing per couple. We came up with a number that bore a very close resemblance to the $11K we were each in the process of losing as Genuity continued to fall arse over tea-kettle into oblivion.

Through some peculiar tax loophole that I'll wager has since been closed, as long as you showed up for a breakfast that featured two sales guys describing a deal they'd won, the entire week - and it was quite a week - was considered work.

As I said, I don't know what's going on on the inside of Vonage. I'm sure it's not altogether pleasant, but I'm sure that there are more than a few moments when for the folks working there, it still seems almost worthwhile. (Hoo-hoo, hoo-hoo-hoo.)