TeleNav, When IPOs Die (TNAV)

If you have been an IPO investor in 2010, you might wonder if there are better ways to make a buck.  TeleNav, Inc. (NASDAQ: TNAV) just joined in the wave of problem IPOs trading well under the IPO price.  The drop after earnings is severe enough that TeleNav may have just become the poster child for crummy IPOs.

When this company came public in May, its shares gained more than 20% on the first day of trading.  It priced 7 million shares at $8.00 per share.  The original price range was $11 to $13 per share.

TeleNav’s fiscal year-end report last night killed the stock.  It was its first earnings report since coming public.  The data from March was solid with revenues rising 59% to $122 million and net income increasing 57% to $31 million over the March 2009 period.  Last night’s revenue was a mere $49.5 million with $0.31 EPS on an adjusted basis.

Its forecast for the September quarter was put at $50 million in revenue with an adjusted EPS figure of $0.23.  Estimates were $0.21 EPS and $49.75 million.

The issue with the company is that servicing a few large clients creates a scenario of either good hits or bad misses.  The company generated about 61% of revenues in 2009 from Sprint.  Last night the company warned that a contract renegotiation with Sprint could lead to a drop in revenues as it expects that any extended agreement will bring about lower average revenue per user and lower revenues as a whole despite an expected gain in subscriber numbers.

Offering GPS navigation services is now a challenging field.  Google, and Apple, are driving the economics of the sector lower even if their services are different.

TeleNav shares are paying a dire price today.  The stock is down 37% at $5.59 on over 2.5 million shares in just over an hour since the market opened.  To illustrate just how bad this is, TeleNav only traded 2.349 million shares on its IPO launch date.  The difference is that the stock closed at $9.80 that day.

Today is the first day that the stock is technically classified as a busted IPO.  For IPO’s, this is a much broader issue.  The damage here is not just in TeleNav.  This offers less and less hope for investors who look at new speculative companies that are trying to come public.

JON C. OGG