Vonage Hope Vaporizes

Vonage is one of the most recognized brands on the Internet, thanks to the full-court press of advertising on both the Web and on television. In fact, the company was the largest buyer of Internet advertising for the past two years, according to Nielsen//NetRatings.

Though Vonage has appealed to customers fed up with what they see as the high costs and poor quality of traditional phone service, investors weren't won over on the first day of trading.

Another possible issue for investors is the nature of the team behind Vonage.

Public investors now hold 20% of Vonage. But early stage investors hold 45% and founder Jeffrey Citron controls a 31% stake. Vonage cautioned investors about Citron's prior association with Datek Securities, a daytrading firm that ran afoul of the Securities and Exchange Commission.

Citron settled the SEC charges against him without admitting to any wrongdoing, but the company warned in its prospectus that Datek's reputation could end up working against Vonage by scaring off possible customers.

On top of that, there's the thing where insiders might want to sell once their lockups expire in six months.

The prospectus says 124.5 million of Vonage's 155 million shares are "restricted securities" subject to a 180-day lockup. "We expect many of these shares will be sold when these lock-ups expire," Vonage says.