The Five Dumbest Things on Wall Street This Week

3. Lemon Tree

The Vonage (VG) IPO got slammed.

This week, the Holmdel, N.J., Internet phone company held its long-awaited initial public offering. Vonage raised $531 million, making it the biggest Internet IPO since Google (GOOG) scored $2 billion in August 2004, Thomson Financial said.

But comparisons to Google, which gained 18% on its opening day and never looked back, quickly evaporated when Vonage stock opened on the New York Stock Exchange. Vonage shares plunged 13% Wednesday -- giving its IPO the biggest opening-day drop this year -- and slid another 13% Thursday, dropping below $13.

Of course, there are other differences. Where Google mints money, Vonage incinerates it. Where Google stands above its Net search rivals, big competitors are crushing Vonage. And where Google fatuously pledged to do no evil, Vonage is making no promises.

Founder Jeffrey Citron, who still owns 31% of Vonage, agreed in 2003 to pay $22.5 million to settle charges that he illegally manipulated Nasdaq's small-order trading system for personal gain. Citron didn't admit to any wrongdoing, but Vonage warned in its prospectus that would-be customers might have some issues with his run as the former owner of daytrading firm Datek.

"We believe that some financial institutions and accounting firms have declined to enter into business relationships with us in the past, at least in part because of these matters," Vonage said.

One other risk is that insiders, who hold more than three-quarters of the stock, might want to get out. Some 124.5 million of Vonage's 155 million shares are "restricted securities" subject to a 180-day lockup, the prospectus notes. "We expect," Vonage says, "many of these shares will be sold when these lock-ups expire."

Assuming there are any buyers, that is.

Dumb-o-Meter score: 90. Can't say Vonage left any money on the table, anyway.