This is a classic high stakes Wall Street sucker punch...F-ing brilliant. I’d like to shake the hand of the person that thought this out. Citigroup, Deutsche Bank, and UBS now have to work a lot harder to sell this deal. Boo-hoo.
Man, did I catch some heat. Almost 50 comments later, lot's of them personal, swearing that the Vonage deal was oversubscribed, telecom execs were begging to get in, institutions were all over it, Skype is for geeks and Vonage is grandmother friendly. jm or jj is still insisting this is the greatest IPO ever. Does he work for the company? The underwriters? The investors? Whatever.
Only the syndicate guy at lead manager Citigroup knew what the order book looked like. These guys always like to hint that its a hot deal to suck in more orders. 13.5% of the deal was reserved for Vonage customers, the poor schnooks.
Here's how not to do a deal. Citigroup raised the number of shares in the deal, but not the price. Bad move - it signaled some weakness. Worse was pricing it at $17, the mid point of the $16-18 filing range. It broke price in the first few minutes and then broke the bottom of the range in the first hour. Citigroup got paid their 7% fee, Vonage got their money to live another year or so, but now its a broken deal. Citigroup may be mopping up by buying shares. They almost have to - to get the egg off of their face.