NEW YORK (CNNMoney.com) - Vonage hopes to raise as much as $562.5 million when it goes public, but at the rate the company is burning through cash, it may end up leaving a hole in investors' pockets.

The Internet phone company will make its market debut as early as next week. However, the company's troubling financials may give longer-term investors reason to hold back, analysts say.

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Vonage has posted explosive rates of sales and subscriber growth since it launched its service in 2002. But it has been hemorrhaging money at a time when long-term investors have been seeking more consistent profits from newly public companies. Vonage could not be reached for comment. "Quiet period" rules prohibit companies from publicly discussing information disclosed in their prospectus ahead of an IPO.

Vonage plans to sell about 20 percent of its total shares. Its backers, which include 3i Group, Bain Capital, Institutional Venture Partners, Meritech Capital Partners and New Enterprise Associates, will own about 45 percent of the company's stock after the offering.

The company has said it expects its shares to price between $16 to $18 a share, which would value the total company at about $2.6 billion. The company will trade on the New York Stock Exchange under the symbol "VG."

Holmdel, N.J.-based Vonage is one of the industry leaders in so-called voice over Internet protocol technology. Subscribers of the firm's services can make phone calls with their computer by plugging a standard phone into an adapter.

Since the company launched in 2002, its business has grown at a breakneck pace. Revenues in the quarter ended March 31 nearly tripled from the same period last year to $118.9 million. But it's been losing money at a rapid pace as well. The company's net loss widened to $85.2 million in the latest quarter.

"Customer acquisition is very expensive. Somebody has to fund the losses, and right now they're looking for public investors to fund the losses," said Scott Cleland, president of Precursor, an independent research and consulting firm focusing on media and telecom. "The question is when are they going to turn a profit."

It isn't unusual for unprofitable start-ups to go public, but what's worrisome in the Vonage case is that even as the company has generated more revenue, its rate of loss hasn't declined, analysts say.

"From an investor perspective, it hasn't been proven that this company can build economies," said Brian Hamilton, CEO and co-founder of Sageworks, a financial analysis firm that focuses on private companies.

Vonage said in its prospectus that it is "pursuing growth, rather than profitability" in the near term and that it may never post a profit. It attributes its recent losses to marketing costs, which it has been shelling out in a bid to capture market share in the emerging Internet phone sector. Last year the company hauled in $269.2 million in revenue, but it spent a whopping $243 million on marketing expenses.

Aggressive marketing efforts have earned Vonage 1.6 million subscribers as of early April, according to the company, and analysts say the firm dominates the VoiP space in terms of brand recognition.

Vonage claims its customer base is loyal, and is even giving its subscribers a crack at its IPO. But the company's position could be threatened if telecoms firms with stronger capital and resource bases get in the Internet phone game.

"It's a very difficult concept to understand how Vonage can go into this market and expect to maintain a dominant position when its financials need constant patching up because of continued losses," said David Menlow, president of IPOfinancial.com, a public offering research firm.

Potential competitors include traditional phone companies like AT&T (Research), as well as cable firms such as Cablevision Systems (Research) and Comcast (Research). Vonage said it also faces competition from other Internet phone services such as that offered by eBay's (Research) Skype, which offers software that users can download for free to call other Skype users.

The company's management may also raise some concern for shareholders. Before starting Vonage, founder and chairman Jeffrey Citron worked at brokerage firm Datek Securities. The SEC alleged Citron was involved in a fraudulent scheme when he worked there, and Citron reached a settlement with regulators in 2002 and 2003, Vonage said in its prospectus. Citron stepped down from the chief executive spot at Vonage in February and was replaced by Michael Snyder.

Vonage faces stiff competition ahead and it's unclear how the company's business will pan out, but there's a lot of momentum behind the business, according to Paul Bard, an analyst at Renaissance Capital, which manages the IPO Plus Aftermarket Fund (Research).

Furthermore, each of the subscribers Vonage has attracted represents a recurring revenue stream, and in the long run, that could make the firm attractive to a corporate buyer, he said. "The real appeal for the investment community comes down to growth, and there aren't too many companies with this sort of growth."

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