As an ad sales guy, I served Vonage on a couple of ad deals and saw that the VOIP company was spending a lot of money.   No really, I mean a lot.

At one point or another, the agency serving Vonage would step in and pull the plug on the campaign, because the money wasn’t even being wisely spent.  To the agency’s credit, they would realize that before the end of the campaign. 

That was sometime in 2005 or so.  VOIP was to be huge, or so we were told, so there was a reason to be investing in the future.

In 2006 when Vonage was going public, initially I said: “maybe I should buy in, VOIP is a hot sector.”  Of course, very few firms really make money post IPO.  Google is one example, as is Goldman Sachs (who’s gone from $85 or so to $200+), and others exist as well, if you’re patient.  My problem with IPOs is that most of the gains come to early shareholders and the IPO-day price gets a pop that is sometimes hard to maintain.  Online ad company Fastclick went through this a few years ago, eventually selling out to Valueclick.

All to say, when I read up on Vonage in 2006, I realized that the company was bleeding money; as such, my desire to go long was soon turned to a desire to short the stock.  But I did not, because shorting a stock requires a special sack of nuts.  I actually tried it once, with Sandisk, a company I was both long and short at various times, without losing my shirt, and nuts.

Today, Vonage is a fraction of what it was on its IPO.  I have no regrets for not shorting it, but I am certainly glad I did not buy it either.

If you’re anything like me and missed out on shorting Vonage, fear not, here’s a doozey of an IPO: that of Orbitz.  Please, for the love of all things holy, do not take this as a recommendation to short or buy, it’s just an observation on the IPO market.  I’m just saying I would not buy this stock in particular…

Anyway, if you want to see what is wrong with the IPO market - before it’s even fully come back to life - check out GigaOm’s Kevin Kelleher fantastic breakdown of the prospectus and other so-called confidential information here.

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