The past week or so has been an important period to test the public market’s receptiveness to companies within the converging internet, mobile and digital media sectors. ReachLocal debuted last Thursday and TeleNav the previous Thursday. Both suffered from a volatile stock market as they met with institutional investors. The good news is that both were completed, albeit at valuations discounted from their objectives.
As we noted in our previous post, ReachLocal (NASDAQ:RLOC) helps local merchants create online marketing programs. Local marketing and advertising is receiving quite a bit of attention by many major vendors including Google, Yahoo!, Nokia and AOL, among others. The prize being chased is $60.5b in annual spend in the process of transitioning from traditional local marketing methods such as yellowpages, print advertising, radio and direct mail to digital methods such as internet and mobile based search, display ads and message-based marketing programs.
ReachLocal was forced to cut their proposed offer price from $18 per share (mid-point of expected range) to $13 (28% discount). ReachLocal is now the 10th consecutive IPO which has priced below its hoped for price. In this instance, we believe this result is all about the overall IPO market weakness.
TeleNav Inc. (NASDAQ:TNAV) priced their IPO a bit over a week ago, on Thursday, May 14 2010. They were also forced to cut their IPO price, in their case by 33%. Although the stock initially showed a strong gain in the first day of trading, the price quickly returned to a level close to its IPO price, closing at $8.47 by Thursday, May 20 2010. TeleNav has built an enviable business providing turn-by-turn navigation software to wireless carriers, who then offer the service to their subscribers for a monthly service fee. All was good until Google announced a competitive offering for free, which was closely followed by Nokia.
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