TeleNav has successful IPO

Business folklore holds that all little piggies get to eat, but hogs get slaughtered. That don’t-be-greedy moral played out Thursday as TeleNav, a Sunnyvale maker of navigation technologies, had a successful Wall Street debut, its shares jumping 22.5 percent.

TeleNav’s tale may carry a message for Silicon Valley startups and venture capitalists eager to test Wall Street amid a shaky recovery.

TeleNav’s successful initial public offering came only after it downsized its expectations, dropping the price of shares to $8, far below the $11 to $13 range cited in its initial regulatory filings. TeleNav wound up raising $56 million in the offering, compared with the $84 million it initially sought.

“For TeleNav to pull off the IPO in these market conditions, they get a gold star,” said Kathy Smith, a principal with Renaissance Capital, a Connecticut firm that analyzes the IPO market.

And if TeleNav — TNAV on the Nasdaq ticker — performs well in the market, “they’ll be able to do a secondary offering later and get more cash,” said Scott Sweet, senior managing partner of IPOBoutique.com.

Silicon Valley venture capitalists and entrepreneurs are anxious for recovery in the IPO market, considered a vital cog in Silicon Valley’s distinctive economy. Successful Wall Street debuts provide venture firms with their most lucrative profits, enabling them to deliver returns to limited partner investors and raise more capital for future investments. The alternative is less lucrative merger and acquisitions, which have increased to pre-recession levels while the pace of IPOs lags.

TeleNav was among several valley startups that have positioned themselves for IPOs, with electric carmaker Tesla Motors as the headliner. Despite some successful recent valley IPOs, such as Financial Engines and Meru Networks, institutional investors have largely been chilly to new offerings as concerns like the Greek financial crisis roil global markets. Last week, four companies nationwide withdrew IPO plans, including Sunnyvale-based Telegent Systems.

TeleNav lowered its target price twice en route to Wall Street. After projecting the $11 to $13 price range in November, it lowered its target to $9 to 10 Wednesday. That came after Menlo Ventures, one of TeleNav’s investors, gave a vote of confidence by purchasing more shares in the company. But with buyers still balking, it lowered the price to $8. Shares initially jumped more than 33 percent in early trading, before settling back to a 22.5 percent gain at the close of trading.

Large institutional investors such as Fidelity and Vanguard, Sweet said, have pushed prices downward in the aftermath of disappointing performances from some pricier IPOs.

Investors may also be wary of TeleNav’s competition, noted Renaissance’s Smith. Heavyweights such as Google and Nokia, and device makers Garmin and TomTom, factor into the navigation market.

TeleNav, founded in 1999, is reporting revenues at an annual run-rate of $180 million, and a 20 percent operating margin. While it’s in highly competitive markets, Smith said, it has a track record of growth.

Contact Scott Duke Harris at 408-920-2704.