Potential Large VC-Holder Sales Coming in Vonage, Sort Of

Vonage Holdings Corp. (NYSE: VG) may have a significant wave of insiders selling shares soon. The low-cost IP-telephony provider announced on Monday that a key backer has distributed shares to its limited partners.

In the press release it shows that New Enterprise Associates (NEA) is an early venture capital investor in Vonage and that New Enterprise has distributed some 5.8 million shares of Vonage common stock out to its limited partners of its funds.

It is important to differentiate one issue here from a sale and an exit. The press release shows that NEA remains a significant Vonage shareholder. If you look through the most recent SEC filings, it appears that the total shares held by New Enterprise were about 14.06 million shares. This also compares to some 27.9 million shares held by nonexecutive chairman Jeffrey Citron.

Another consideration is that a distribution does not assure that all shares will be sold into the market. It is very likely that some will be sold, but insiders often take months or years to “leg out of” a position where they were insiders.

Vonage shares trade more than 1.6 million shares on an average day, so this potential sale does not even count for the volume seen in four trading days. If this was going to be worse, shares would be down more than 4% on the news. The $2.30 share price compares to a 52-week trading range of $1.63 to $3.52.

JON C. OGG