The NYT is reporting today (see here) that approximately 10,000 Vonage customers participated in its directed share program for its recent IPO.Â Customers had until yesterday to pay for the shares.Â However, given that the stock has dropped from its IPO price $17.00 to $12.50, some customers are refusing to pay.Â Vonage indicated that it will repurchase unpaid for shares from the underwriters if necessary letting the customers off the hook.Â This is probably a smart move given Vonageâ€™s section 12(a)(1) exposure from its FWP snafu (see here).Â But what about customer’s who already paid?Â Will Vonage let them rescind?
It is not illegal but would normally constitute a breach of contract. As to whether breaching a contract is unethical or immoral, Holmes at least would say no: “The duty to keep a contract . . . means . . . that you must pay damages if you do not keep it,–and nothing else . . . .” The underwriters could pursue the reneging shareholders for breach, but apparently Vonage does not want to engender further ill will among its customers so it has made the business decision to let the customers off the hook.
Is it not illegal, or at least unethical, to refuse to pay for shares one contracted to buy?