Most every time that a corporation files its intent to publicly trade its stock- as Vonage did yesterday- the company has to include a "Risk Factors" section in its Securities and Exchange Commission filing.
Think of "Risk Factors" as a type of disclaimer- not unlike the ones you see on those 60-second pharmaceutical ads where a recitation pretty much anything that could ever go wrong is added to the script. You know: hives, migraines, you-know-whats (as if) lasting more than four hours.
Or, those "in the event of a water landing" recitations you get at the start of a flight that will cross no water deeper than a farm pond.
With those "could happens" in mind, I wanted to see what Vonage thinks their risk factors are. I checked the filing, and oh, there are many.
First, the boiler-plate pre-amble:
"An investment in our common stock involves a high degree of risk. The following risks, as well as the other risks discussed in 'Risk Factors,' should be carefully considered before participating in this offering: (indents are Vonage's comments, boldfaced outdents are mine):
Our history of net operating losses and our need for cash to finance our growth;
Yes, they have been losing money, and are paying several hundred bucks for each new subscriber they sign up. Yet since they only get about $24 or $25 bucks of revenue for each subscriber, their return on investment for subscriber acquisition marketing falls into the several-year time frame.
The competition we face, including from companies with greater financial resources;
Like, oh, let's see: Verizon, AT&T, Comcast, Time Warner, many others.
Differences between our service and traditional telephone services;
E911 inconsistencies, not owning your own transmission infrastructure, etc.
Uncertainties relating to regulation of VoIP services;
Net neutrality may not pass. Big telecom and big cable have lots of money and lots of friends.
System disruptions or flaws in our technology;
Bugs, security concerns, and stuff that cannot even be anticipated yet.
Our ability to manage our rapid growth; and
We've all seen companies that grow too fast, and have system performance, equipment shipping, and customer service issues as a result. For example, what if this "rapid growth" brings in lots of newbies who need quite a bit of handholding? Will phone help line wait times increase to unacceptable lengths, disillusioning these new customers and pissing off experienced users who are calling with problems?
The risk that VoIP does not gain broader acceptance.
"Crossing the chasm" between early adopters and mass acceptance is a real concern for all growing companies selling newer technologies.
OK readers, can you think of any other "Risk Factors" Vonage should have put in their filings? If you can, let us know by posting a TalkBack!