Pandora shares jump, then slump in initial trading

The Web music service gets off to a fast start on the stock exchange, with shares first surging above the IPO price of $16, followed by a midday nose dive.

Pandora first-day trading
Pandora's shares got off to a hot start, but cooled off quickly. Yahoo Finance/Screenshot by Jonathan Skillings, CNET

Shares of Pandora leaped in initial trading this morning, quickly exceeding yesterday's already raised expectations--and then spent the rest of the day heading inexorably downward.

In the first minutes of trading, Pandora's stock soared as high as about $25 per share, shortly after that began hovering at around $23 per share, and an hour or so into the day had slipped to just under $21. Those figures were well above the $16 price the company set yesterday when it priced the shares in its initial public offering at roughly twice the value that it expected just two weeks ago.

By the midpoint of the trading session, however, the downward trend took a dramatic turn, with shares plunging below $19.

The day wrapped up with Pandora standing at $17.42, not much above the company-designated price point and down from the opening price of $20.

Earlier this month, the company, which runs a personalized Web radio service, said in a regulatory filing that it expected to offer stock between $7 and $9 a share .

At the new pricing, Pandora was poised to raise $235 million. Roughly $96 million of that will go to Pandora, as some of its shareholders cash out. Hearst Corp., for example, is selling 8.7 million shares.

The IPO pricing of $16 put Pandora's market capitalization at $2.56 billion. That's sure to fuel talk that a new Internet bubble continues to grow. Pandora, after all, loses money.

Related links:
• Groupon files its IPO papers
• Facebook planning IPO on $100 billion valuation?
• Cafepress files to raise $80 million in public offering

For the nine months that ended April 30, Pandora lost $6.8 million on sales of $51 million, compared to a $3 million loss on sales of $21.6 million in the same period a year ago, according to a Securities and Exchange Commission filing. Those losses come largely from the price the company pays to acquire the content it plays for customers.

Founded in 2000, Pandora lets users choose songs or artists, and the service's music recommendation engine chooses a stream of songs based on their choices. The company, one of the most influential music sites on the Web, sells paid subscriptions and offers a free ad-supported version.

According to its SEC filing, the service has 90 million registered users, who streamed 3.8 billion hours of audio last year.

Plenty of money-losing companies with potential go public. Earlier this month, the daily-deals service Groupon filed to sell stock , despite losing $146.5 million in the quarter that ended March 31 and some $456.3 million in 2010.

Pandora is trading on the New York Stock Exchange under the ticker symbol P.

See also, on other CBS Interactive sites:
• Pandora makes debut: Public venture capital returns
• Pandora IPO: Watch for Sirius XM to retaliate with music fee trap
• Pandora's Cost of Music Isn't the IPO Problem Critics Think
• Pandora Jukebox Collects a Lot of Coin for Some Investors
• Pandora IPO: No profits, but there's always hope

This story was initially published June 14 at 3:59 p.m. PT. It was updated several times on June 15 to reflect trading patterns during the day.

About the author

Jay Greene, a CNET senior writer, works from Seattle and focuses on investigations and analysis. He's a former Seattle bureau chief for BusinessWeek and author of the book "Design Is How It Works: How the Smartest Companies Turn Products into Icons" (Penguin/Portfolio).

 

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