Pandora Dives Below IPO Price In Second Day Of Trading
By BRIAN DEAGON , INVESTOR'S BUSINESS DAILY
Posted 11:16 AM ET
Internet radio provider Pandora Media (P) tumbled 10% to 15.67 in late morning Thursday trade, below the $16-a-share IPO price. That's nearly 40% below the peak set minutes after shares began trading in Wednesday's NYSE debut. Several other recent IPOs have tumbled below their offering prices or at least are at all-time trading lows.
Internet radio provider Pandora tuned in a sweet-sounding initial public offering, but Wednesday's debut ended on a somewhat sour note.
It raised $235 million by offering 14.7 million shares at $16, up from the $10 to $12 the company expected. Shares shot up to 26 in early NYSE trading, but closed up just 8.9% to 17.42, near the session low. That came as the overall market sold off hard.
Pandora is one of several Internet company IPOs to receive sky-high valuations reminiscent of the dot-com boom. It ended the day with a market value of $2.8 billion, despite losing $1.76 million on revenue of $137.7 million for the year ended Jan. 31.
LinkedIn (LNKD), the professional networking site with Q1 revenue of $94 million, has a market value of $7 billion following its May IPO, though it recorded a profit its past five quarters. Online coupon provider Groupon, which also has yet to get into the black, has filed for an IPO that would give it a valuation of about $20 billion.
Facebook principals reportedly are also mulling an IPO that would value the company near $100 billion. Only one Internet firm, Google (GOOG), has a larger valuation, and only five other companies in all are bigger by value.
All this leads to fears of another dot-com bubble, 11 years after the first one burst.
"People are trying to figure out what the growth trajectory of these companies will be," said Saad Khan, a partner at San Francisco investment firm CMEA Capital. "What gets people excited is these companies have crazy ramps that go from zero to billions in revenue so quickly."
Private investors have been willing to pour huge sums into these firms, which many observers see as disrupting old business models through new forms of communication and commerce.
"Facebook has stitched together 600 million users in a brand-new way," Khan said. "Pandora is subverting a very old broadcast medium with Internet radio, where people are spending billions of hours, all of it personalized. That's powerful."
But as in the first dot-com boom, making money often has not been the initial focus. Instead, the company has focused on attracting users as fast as possible, and keeping them coming. Figuring out how to profit from that traffic has been a later step.
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