June 14, 2011
Pandora closes at $17.42, $2.78B market cap
Pandora's first day of trading falls in with the trend of other explosive Web companies
After hitting an early morning high of $24 a share, Pandora closed out its first day of trading at $17.79, roughly 9% higher than its starting price of $16 a share, for a market cap of $2.78 billion. It's a more modest market cap than the earlier highs of $3.5 and $3.7 billion, but it's still significantly higher than the $1.9 billion Pandora was previously valued at when it had priced its shares at $10 to $12 each.
Pandora hit the NYSE Wednesday morning, and less than half an hour into trading, the company’s stock was soaring 35% at over $21 a share for a market cap of more than $3 billion, making quite a few happy millionares. That’s a far cry from the estimated $1 billion valuation Pandora was given two weeks ago when it priced its IPO at $7 to $9 a share. On Tuesday night, initial trading priced the company’s shares at $16 for a valuation of $2.6 billion. Can Pandora keep up the momentum?
The company’s skyrocketing share prices come amid a recent string of naysayers who have warned investors against buying Pandora shares at such high prices. Pandora was considered a safe bet until it raised its share prices from the $7-$9 range to the $10-$12 range, causing some analysts to grow leery. Specifically, BTIG Research released a report advising investors not to buy Pandora stock at the $10 to $12 prices, arguing that Pandora’s shaky future and inability to turn a profit over the last 11 years make it an unwise investment. Rather, the research firm argued, a more accurate share price for Pandora would be $4 to $5 a share.
Investors clearly disagree. Pandora hit the ground running this morning at $20 a share, nearly triple the $7-per-share price tag it had previously put on its shares. The company’s popularity as the premier online music streaming service is a force to reckon with. Pandora claims a full 60% of the online listening market. Meanwhile, competitors like Spotify are rising and looking to get into the space, but will have to contend with Pandora’s established and diffused industry presence.
Thus far, it would appear that Pandora is one more in the string of recent successful Web IPOs, including LinkedIn, which hit the market back in May at $80 a share, closing its first day at $94—a full 109% over its initial price of $40 a share for a market cap of $8.91 billion. Today, LinkedIn is down to a more modest $75 a share, which is still significantly higher than its initial price of $40.
Demand Media also had an explosive first day of trading when it made its initial public offer in January, soaring out of the gates at 40% over its initial price of $17 a share. Today, Demand’s stock has taken a hit and is now trading at $14.91 a share.
So Pandora’s future from here on out is anyone’s guess, but if the company has been able to survive the last 11 years while founder Tim Westergren was maxing out credit cards just to keep the business running, it’s certainly not going anywhere now.
Image source: blogspot.com
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Pandora
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Pandora, the leading internet radio service, gives people music they love
anytime, anywhere, through a wide variety of connected devices: laptop and
desktop computers, smartphones, connected BluRay players, connected TVs,
etc. Personalized stations launch instantly with the input of a single “seed” –
a favorite artist, song or genre. The Music Genome Project®, a deeply
detailed, hand-built musical taxonomy, powers the personalization or
Pandora. Using this musicological “DNA” and constant listener feedback
Pandora crafts personalized stations from the more than 800,000 songs that
have been analyzed since the project began in January 2000.
More than 75 million people throughout the United States listen to
personalized radio stations for free on Pandora through their PCs, mobile
phones and devices such as the iPad, and connected in-house devices
ranging from TVs to set-top boxes to Blu-Ray players. Mobile technology has
been a significant factor in the growth and popularity of Pandora, starting
with the introduction of the Apple app store for the iPhone in the summer of
2008. Pandora instantly became one of the most top downloaded apps and
today, according to Nielsen, is one of the top five most popular apps across
all smartphone platforms.
Pandora is free, simple and, thanks to connectivity, available everywhere
consumers are – at the office, at home, in the car and all points in between.
In 2009 the Company announced that Pandora would be incorporated into
the dashboard in Ford cars via SYNC technology; GM has already followed in
announcing plans to integrate Pandora into its vehicles and Mercedes-Benz
introduced their Media Interface Plus device that works with the
free Pandora iPhone app to provide direct control of Pandora from in-dash
stereo controls. This was all great news for the millions of Pandora listeners
who had been plugging their smartphones into car dashboards to listen to
personalized stations while driving. More than 50 percent of radio listening
happens in the car, making it a crucial arena for Pandora.
Today tens of millions of people have a deeply personal connection with
Pandora based on the delight of personalized radio listening and discovery.
These highly engaged listeners reinforce the value Pandora provides to: 1)
musicians, who have found in Pandora a level playing field on which their
music has a greater chance of being played than ever before; 2) advertisers,
who benefit from the multi-platform reach of Pandora, as well as its best
practices in targeting consumers for specific campaigns; 3) the music
industry, which has found in Pandora a highly effective distribution channel;
and 4) automobile and consumer electronics device manufacturers, who have
noted that incorporating Pandora into their product makes it more valuable
to consumers.
Pandora continues to focus on its business in the United States. The radio
arena has never been hotter, thanks to technology that enables radio to be
personalized to the individual and more accessible than ever before. Right
now millions of people listen to Pandora in the United States and we hope
someday to bring Pandora to billions of people around the world.
Timeline:
• 2000 – Tim Westergren’s Music Genome Project begins.
• 2005 – Pandora launches on the web.
• 2008 – Pandora app becomes one of the most consistently downloaded
apps in the Apple store.
• 2009 – Ford announces Pandora will be incorporated into car
dashboard. Alpine and Pioneer begin selling aftermarket radios that
connect to consumers’ iPhones and puts the control and command of
Pandora into the car dashboard.
• 2010 – Pandora is present on more than 200 connected consumer
electronics devices ranging from smartphones to TVs to set-top boxes
to Blu-ray players and is able to stream visual, audio, and interactive
advertising to computers, smartphones, iPads, and in-home connected
devices.
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