GadgetCrowd

Silicon Beat: Shares of Vonage, the Internet telephony company, plunged 12.6 percent on its first day of public trading today.Not like the company had any choice. It had to go public.

We’ve all been saying it is losing money, and its prospects looked really rough, and we all questioned whether it should go public. But had the company blinked, and stayed private, it would have been game over — for Vonage and its investors. Competition from Comcast and others is intense, and losses are mounting. Investors pumped in hundreds of millions of dollars, and with no company willing to acquire Vonage, the IPO was the only way the investors could cash out of their ownership stakes.

So who was crazy enough to buy shares of this IPO?

The company is planning to use most of the $493 million it raised for additional advertising, including expensive wacky TV commercials.

“This is a company that is losing a tremendous amount of money,” Kathleen Smith, founder of Renaissance Capital, told Bloomberg News. “They’re buying their way into the business.”

At the close of trading, Vonage shares were at $14.85, down $2.15, or 12.6 percent. So it just lost 12.6 percent of its $2.6 billion value — or $325 million.