Vonage in next 60-90 days: gradual stock slip, more suits, private equity takeover with likely bankruptcy filing

Today, Saturday June 24, marks exactly a full month since Vonage stock went on sale at a price based on the $17 a share IPO level.

Vonage closed yesterday, and the week, at $8.75 a share.

Given that Vonage stock is 30 days old, and is little more half its opening price, it is both fair and timely to assess where the stock may be headed- and what that tells us about Vonage's future.

In the last few weeks, I've noticed an emerging pattern. After backwardly breaching the $10 a share barrier, Vonage stock has been holding its own on non-eventful days, while sliding precipitously on days with bad news (like another infringement suit, now 10 and counting), an overall market decline due to outside forces, or both.

Sliding precipitously, such as between 20-40 cents a share. Sometimes by a little more, sometimes by a little less.

Then, on non-eventful days, there may be a recovery, but one so small that the growing slide is nowhere near neutralized. Friday was a perfect example: no bad news, final price up 10 cents to $8.75, after sliding over the previous two days from $8.92 to $8.65 a share. The stock had plunged earlier in the week in large measure because of the Verizon infringement suit.

I see this pattern of gradual being perpetuated over the next  several weeks. The $8-a-share-barrier looks breachable sometime in July. Unfortunately, at this point, the slide may wind up feeding on itself and launching a negative, predictive, feedback loop.

The gradual dip will bring more pissed-off shareholders into the public square. Expect more gloomy analyst quotes, more lawsuits. These developments may  possibly be offset by inevitable trial balloons about buyouts or even a sale of the company. But the logical buyers may not even be interested in acquiring a company with a reputation as damaged goods.  Further shareholder and infringement suits, a Net Neutrality legislative logjam or a likely combination of all three could well accelerate a process that drags Vonage's stock price down to one-thirds its IPO level by summer's end.

It may not get that far, though. I don't see Vonage as being sold- not in the next few months at least. History is replete with struggling companies experiencing partial buybacks or private equity infusements aimed at boosting investor confidence and then the stock price as a result.

In the case of Vonage, I'd regard this strategy as a near-certainty.

Then, if it doesn't work, I belive the downward spiral will continue to a point with an even more self-predictive effect.

If Vonage's stock gets down to the mid-single digits, Vonage may finally start to prove attractive to a potential buyer.

But I say again: that buyer will not be a SprintNextel, but be a private equity group that rather than just invest in a Vonage trading at say a $7 a share level, they will acquire the company outright at $5.

Then comes the belt-tightening, the substantial cutting back on company-bleeding advertising and marketing, and even possible bankruptcy  reorganization.

This would be accompanied by Vonage being reinvented as a privately held company with a growth strategy that is somewhere between deliberate and parsimonious.