According to the complaints, TeleNav allegedly failed to mention in its IPO prospectus and filing the risk around the renegotiation of its contract with U.S. wireless operator Sprint, its biggest customer (55% of revenue during the last quarter).
On July 29, 2010, TeleNav informed its shareholders that it had started negotiations regarding contract roll-over with Sprint, writing: “TeleNav anticipates that any extended agreement would result in declines in ARPU and significant reductions in total revenue from Sprint for bundled basic navigation services compared to the most recent quarter, but would also likely result in continued increases in the number of subscribers. TeleNav cannot predict whether or when it will reach agreement with Sprint on these matters or what the ultimate financial impact would be.” On this news, TeleNav's stock fell $3.47, to close at $5.44 per share on July 30, 2010.
Crystal clear IPO filing about Sprint contract
However, the IPO filing of TeleNav (S1 form - October 2009) and susequent filing with the SEC are crystal clear on their contract with Sprint, stating: "Our current agreement with Sprint expires on December 31, 2011; however, our right to be Sprint’s exclusive provider of Sprint Navigation expires on December 31, 2010. Commencing on December 31, 2010, Sprint may terminate its agreement with us at any time by giving us 30 business days prior written notice. Our failure to renew or renegotiate this agreement on favorable terms or at all, a termination of our agreement by Sprint or our failure to otherwise maintain our relationship with Sprint would substantially reduce our revenue and significantly harm our business, operating results and financial condition."
It is a common practice for specialized US law firms to seek class action status on such topics (GPS manufacturer SiRF faced the same type of complaint few years ago), but here their case seems particularly weak. It is however a pain in the neck for TeleNav.