May 22, 2006

Kathy Casey Nominated for SEC Commissioner

On Thursday, it was announced that President Bush nominated Kathleen Casey to serve as an SEC Commissioner – she currently serves as the Staff Director and Counsel for the Senate Banking Committee, having previously worked as Chief of Staff and Legislative Director for the Committee’s chairman, Senator Richard Shelby (R-Al.). Ms. Casey will replace Commissioner Cynthia Glassman, who announced earlier this week that she will not serve a second term and would leave the agency after her term expires next month.

Ms. Casey, whose term would extend to the middle of 2011, is subject to confirmation by the Senate. I doubt she will have any problem securing confirmation, but I thought it would be useful to provide an overview of the confirmation process (and here is Senate Rule XXXI, which governs confirmation hearings) for those that want to learn about what’s involved in a confirmation.

The First Blast Voicemail Free Writing Prospectus?

In our “Free Writing Prospectuses” Practice Area, we have uploaded this interesting voicemail recording (give it a few seconds to load) from Vonage that appears to solicit interest from its customers in its upcoming IPO (more specifically, the Directed Share Program that will receive an allotment in the IPO). Perhaps the first blast voicemail free writing prospectus? I found this letter to customers filed as a FWP, but I’m not sure if that FWP (or any of the other FWPs filed by Vonage) relate to this v-mail. Perhaps this one?

Per Rule 405 – and footnote 97 of the adopting release for the Securities Act reform – “written communications” includes broadly disseminated or “blast” voice mail messages. So it would seem like a blast voicemail FWP would be required to be filed (and since Vonage is an unseasoned issuer, the blast email would need to be accompanied or preceded by a prospectus pursuant to Rule 433(b)(2) if it were an FWP) – however, since the voicemail and the customer letter are essentially word-for-word, perhaps this FWP is intended to cover both forms of communication. Remember that Rule 433(d)(3) essentially says you don’t need to file if the “FWP does not contain substantive changes from or additions to a FWP previously filed.”

Or perhaps the blast voicemail is intended to be a Rule 134 communication, which now permits more procedural information about directed share programs (note the voicemail includes the statement required by Rule 134(b)(1)). It’s a brand new ballgame and the rules certainly have changed.

Don’t forget to take our new survey on how many pieces typically constitute the “disclosure package” as well as the largest disclosure package you have worked on to date – and which one of six FWPs filed to date is the most interesting.

Vonage’s Directed Share Program

Looking at Vonage’s Amendment No. 5 to the Form S-1, I see that up to 13.5% of the IPO shares are reserved for a “Directed Share Program.” This level seems a tad high, as 5-10% is the normal range (although there were deals in the ’90s with programs over 15% if I recall correctly). And the angle to offer shares through a program to customers is novel, although not unheard of as Boston Beer and Annie’s Homegrown come readily to mind.

I wonder whether this high level is due to (i) a calculation by the underwriters that VOIP subscribers tend to be more affluent and tech-savvy and therefore this is a good way to attract some new high-end retail clients to their private bank or (ii) they are worried that the deal is too large and this is a good way to soak up demand by going out to the true-believers. Based on my conversations with folks that have tried Vonage’s service, my guess is that it’s the latter (which is supported by this recent WSJ article which describes a high level of customer complaints).