Will Vonage Become a Penny Stock?

That thud you heard today wasn't the sound of the Vonage stock price falling -- it was the sound of Vonage investors hitting their heads against the wall as more bad news send the stock plummeting. At this rate, Vonage is headed headed toward becoming a penny stock. Today's news is that Vonage is being sued by Verizon for patent infringement. Verizon claims Vonage infringes on seven different VoIP patents.

That's in addition to a previous patent infringement suit related to VoIP filed last year by a subsidiary of Sprint-Nextel Corp.

And that's not counting all the lawsuits filed in wake of the disastrous IPO over irregularities about how the IPO was handled.

The stock fell another 11.67% yesterday. It was at $8.48, less than half of the $17 price it fetched at the IPO.

Don't feel sorry for those who bought it at $17; this offering smelled from the beginning. In fact, the company prospectus itself admitted that Vonage may never make a profit.The stock may be a shade under $8.50, but there's plenty of room for it to head down -- and it will. It has nothing to offer that big telcos and small upstarts can't offer -- and they'll ultimately offer VoIP calls for free (some are already).

If calls can be made for free, why should anyone subscribe to Vonage?

The only thing of value the company has at this point is a subscriber list. But considering that the list is composed primarily of people who's main interest is in getting as cheap a phone subscription rate as possible, what's the value in the list? There's nothing to upsell them.

So don't be surprised when Vonage continues to tank. That's the only way it's heading.