TeleNav faces a lawsuit in the United States District Court for the Northern District of California on behalf of investors of TeleNav, Inc. (NASDAQ:TNAV) over alleged securities laws violations by TeleNav. Meanwhile an investigation on behalf of former and current employees of TeleNav, Inc. (NASDAQ:TNAV) was announced.
TeleNav, Inc. (NASDAQ:TNAV) has been accused of securities fraud by allegedly issuing a registration statement and prospectus in connection with its May 13, 2010 initial public offering that was false and misleading.
According to the investigation by a law firm under the Dodd-Frank Wall Street Reform and Consumer Protection Act signed into law in July the SEC can award between 10 percent and 30 percent of any monetary sanctions of more than $1 million to whistleblowers who provide original information leading to a successful SEC enforcement. Whistleblowers may remain completely anonymous and work with the SEC through an attorney. Under the new law, so the investigation, whistleblowers are also granted expanded rights and protections against employer retaliation when disclosing information of corporate wrongdoing to the SEC. In addition, so the investigation, under ERISA employees (former and current) of TeleNav, Inc. (NASDAQ:TNAV) may be eligible to file a ERISA complaint for putting stock options at risk if they can prove their employer violated its fiduciary duty to them.
Following TeleNavs IPO in May 2010 its shares started trading in May 2010 at almost $10 and traded as high as $9 per share until July 29, when TeleNav announced its fourth quarter fiscal 2010 results and disclosed that it had started negotiations regarding its contract roll-over with Sprint Nextel Corporation, and if successful, the contract roll-over would probably lead to an aggregate reduction in revenue from its largest customer. The plaintiff alleges that the Registration Statement and Prospectus failed to disclose that TeleNav would soon be renegotiating its contract to provide Sprint Nextel Corporation with its Sprint Navigation application, which would result in lower revenues, that the unwillingness of Sprint Nextel Corp to continue with the same contract terms beyond December 31, 2010 would have negative implications for TeleNav's other wireless relationships, and that adverse changes to the Sprint Nextel relationship would cause TeleNav's results to trend adversely compared to the trends included in the Registration Statement and Prospectus. After TeleNav disclosed the negotiations on July 29, 2010, so the lawsuit, its stock price declined $3.47 per share, to close to $5.44 per share on July 309, 2010, a one day decline of 39% on high volume. TeleNavs stock continued to decline to as low as $4.68 per share n August 10, 2010, but recovered roughly $1in value and traded currently at $5.24 per share, still over 30% less value than during July 2010.