Vonage heads for Internet-size IPO

NEW YORK—Vonage, the company that popularized the idea of using broadband Internet connections for phone calls, is set to go public this week at a price that appears to be drawing in plenty of investors, but skeptical glances from some analysts.
       As a small but well-funded company, Vonage Holdings Corp. has set the pace in the market for voice over Internet Protocol, or VoIP, but its future is far from assured now that the giants of the telecommunications industry, in particular the cable companies, have started getting serious about the business.
       The company is expected to sell 31.25 million shares in its initial public offering, with trading to start Wednesday on the New York Stock Exchange under the symbol “VG.”
       The company expects to get $16 to $18 per share, an estimate it reaffirmed in a regulatory filing Monday. The actual IPO price is expected to be set Tuesday night, and could still fall outside the estimated range depending on demand.
       Interest in the IPO appears strong, according to analyst James DeStefano of Renaissance Capital, which tracks IPOs.
       “It’s coming at a pretty attractive valuation ... people are attracted to growth,” DeStefano said.
       If the shares price at $17 each, the value of the entire company would be $2.6 billion. The company had 1.6 million subscribers on April 1, meaning the upper end of the IPO range values the company at about $1,600 per subscriber.
       Vonage’s valuation assumes that the company will keep growing rapidly. DeStefano estimates that the IPO price is just $600 per subscriber, if calculated by the number of subscribers Vonage is likely to have next year.
       That’s not out of line, DeStefano said, with other growth companies like satellite radio broadcasters. AP