NEW YORK (AP) ¿ Internet phone company Vonage Holdings Corp. said it has agreed to settle a shareholder lawsuit that alleged the company bungled its initial public offering in 2006.

The Holmdel, N.J., company announced the agreement late Thursday, saying the settlement amount would be covered by its directors and officers insurance policy.

The 2006 IPO was a disaster for investors. They bought the shares for $17 each, then saw the value fall 13 percent when they opened for trading on May 24. They were trading at 45.5 cents on Thursday morning, up 4.5 cents.

Atlanta-based law firm Motley Rice LLC filed suit on behalf of shareholders a week after the IPO, alleging that Vonage erred when it reserved 13.5 percent of the IPO shares for customers of phone service. These were not serious investors, the suit alleged, and the failure of some of them to pay for the shares exacerbated the decline in share value.

The parties did not immediately respond to questions about what the settlement would mean for shareholders.

The settlement is subject to court approval.

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