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The integrity of the IPO market is based on complete
and adequate disclosure. It appears that this wasn't
the case with Vonage Holdings Corp. (NYSE: VG).
Vonage, through its subsidiaries, provides broadband
telephone services primarily in the United States,
Canada, and the United Kingdom. On May 23, 2006,
the Company had an IPO and many insiders unloaded
shares at a price which now appears to be substantially
overvalued
It has been a very difficult time for investors who participated
in the Company's IPO. Now, it is alleged that serious
irregularities occurred. Three of the irregularities are
highlighted below.
First, the IPO stated that Vonage's products and technology
would work generally across all Internet providers.
However, Vonage's technology platform has actually
experienced numerous deficiencies carrying data over
certain networks, including AOL.
Second, the IPO stated that Vonage's technology was
sufficient to accommodate facsimile transmissions properly.
However, it has been alleged that the Company uses an
unreliable computer network protocol that results in faxes
not being transmitted properly.
Finally, it is also alleged that the IPO failed to disclose
adequately important facts about its management team.
Specifically, the IPO didn't disclose that CEO Snyder had
overseen Tyco's ADT Security division at a time when
accounting improprieties in that division led Tyco to take
a $600 million accounting charge. Nor was it disclosed
that CFO Rego had been a senior financial officer of
Winstar Communications when that company had allegedly
engaged in securities fraud, accounting improprieties
and false revenue recognition practices, and ultimately
filed for bankruptcy.
With insiders like Snyder and Rego, is it any wonder why
Vonage's IPO disclosure wasn't adequate?
Understanding Black Box
What is a black box? A black box is any device, sometimes
highly important, whose workings are not understood by
or accessible to its user. There is also a company named
Black Box Corp. (NASDAQ: BBOX) that provides network
infrastructure services worldwide. Unfortunately, investors
don't understand what is happening at Black Box Corp.
On June 1, 2006, after the close of trading, the Company
disclosed among other things, that during the fourth quarter
of fiscal 2006 (ended March 31, 2006), the Company incurred
a pre-tax charge of $7.1 million relating to an adjustment
of earnings from FY03 through FY06.
The Company explained that the adjustment was required
because of 'intentional misconduct by certain local
operational and financial management of the Company's
Italian Operations acting in collusion with one another for
the purpose of overstating local financial results.'
Following this news, Black Box shares declined almost 20%.
Presumably, more detail will be disclosed.
It appears that investors who purchased BBOX between
July 1, 2002 and June 1, 2006, are affected
Other situations of interest
Brooks Automation Inc., (NASDAQ: BRKS)
On May 11, 2006, after the close of trading, Brooks, a
Chelmsford, Mass., semiconductor-equipment maker,
disclosed that it would restate its financial statements
contained in filings for some or all of the periods commencing
in fiscal 1999 and ending in fiscal 2005. On May 12, 2006,
its share declined from $13.96 per share to $13.47 per share.
On May 12, 2006, after the close of trading, the Company
disclosed that it received a grand-jury document subpoena
from the U.S. attorney for the Eastern District of New York
requesting records related to stock options. Brooks said it
intends to fully cooperate. On May 15, 2006, shares declined
from $13.47 per share to $12.99 per share. Investors who
purchased BRKS between May 5, 2001 and May 11, 2006,
are affected.
Discovery Laboratories (NASDAQ: DSCO)
The Company had represented for some time that it would
receive FDA approval in April 2006. But on April 24, 2006,
the Company's stock dropped more than 50% after it revealed
that the regulatory process would be significantly delayed.
Investors who purchased DSCO between December 28, 2005
and April 25, 2006, are affected.
XM Satellite Radio Holdings Inc. (NASDAQ: XMSR)
On February 16, 2006, the Company disclosed: (1) higher than
expected expenses and net loss due to greater than expected
spending on new subscription acquisitions and (2) a director
resigned due to his concerns about the cost of growth in
terms of losses. Prior to this disclosure, the Company's CEO
dumped nearly all his XM shares for proceeds of approximately
$11.8 million. Investors who purchased XM stock between
July 28, 2005 and February 15, 2006, are affected.
Cognos (NASDAQ: COGN)
On Monday May 15, 2006, after the close of trading the Company
which is Canada's biggest software Company, disclosed that it
would not file its Annual Report on Form 10-K for the fiscal year
ended February 28, 2006 on time because of an ongoing review
by the Staff of the Division of Corporate Finance of SEC that
may impact the manner in which the company allocates
revenue. On May 16, 2006, Cognos shares declined
$4.46 per share, or approximately 13%, on heavier than
usual volume. Investors who purchased Cognos stock
between June 23, 2005 and May 15, 2006, are affected.
If you are an affected shareholder in any of these companies
you may wish to contact us at info@securitiessleuth.com
or 877.511.4717.
Now with respect to settled cases. If you are an affected
investor - you purchased any of these stocks during the
relevant class period, you may wish to contact the claims
administrator to obtain additional information. Remember,
if you don't submit your claim form, you won't receive your
share of any settlement.
Information regarding recent settled cases, including the cases
listed below can be found at www.securitiessleuth.com.
Whitehall Jewellers (JWL)
Safety-Kleen Corp. (SK) (bonds
ARM Financial Group, Inc. (ARMGQ)
Network Engines, Inc. (NENG)
Boston Chicken, Inc. (BOST)
Surebeam Corp. (SURE)
Salton, Inc. (SFP)
Bristol-Myers Squibb (BMY)
Royal Ahold N.V. (AHO)
Again you should contact the claims administrator (rather than us).
However, if you are an affected investor in any of the
companies under investigation, you many wish to contact us
so that you can consider your options.
Likewise, if you happen to be aware of corporate restatements
or other financial fraud -- especially if you're a victim --
you're encouraged to contribute to the Sleuth by giving your
own tip-offs at www.securitiessleuth.com or by e-mailing
info@securitiessleuth.com. You can also call Mark McNair
at 877-511-4717. If you have a friend or colleague you
think would benefit from The Sleuth, please pass along
this issue and ask them to sign up at
www.cartville.com/app/join.asp?MerchantID=47994.
Warmest regards,
Mark McNair
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