Pandora IPO: Stocks Dip Below Initial Offering Price (P)
As expected
the Pandora (NYSE:P) IPO has proved to be interesting with
stock prices falling below the initial public offering price. While
the company raised $234.9 million in the June 14th IPO, the hype around
this stock has lost some of its shine. Competition in the online music
space from big guns like Apple (NASDAQ:APPL), Amazon
(NASDAQ:AMZN), Google (NASDAQ:GOOG) and
even Sirius XM Radio (NASDAQ:SIRI), has made enough
investors skeptical of its future success.Pandora opened today at $13/share, which leaves those investors who did buy Pandora at $16/share with losses. As we suspected the reality of this reported losses and the completion in the online music space have scared investors off. But Pandora is not alone. Of the 73 IPOs offered this year 31 have sunk below their IPO prices and 41 are now trading below their first-days closing prices, says Renaissance Capital.
Unlike LinkedIn Corp (NYSE:LNKD) which has been able to maintain stock prices 52% higher than its May IPO, Pandora has lose its appeal. The initial hype around the offering has faded and people are starting to see the reality of the situation.
Read more about Pandora (NYSE:P) in our article from Wednesday “Pandora IPO: Is it worth it? (P)”
Pandora IPO: Is it worth it? (P)
The Pandora IPO (NYSE:P) started trading yesterday at
$20/share, higher than the originally projected figure of $16/share.
We saw an immediate 63% jump in the share price to $26 a share; this
puts Pandora’s value at $4.2 billion. By all accounts, Pandora had a
successful IPO and the hype around the opportunity to buy Pandora
(NYSE:P) shares remains. However, a harder look begs the
questions, is it worth it?
Pandora offers its users an interactive radio experience either, for free while serving up ads or without ads at $36/year. Nevertheless, there is growing competition in this space from providers like Google and Amazon; both have recently launched cloud music services. Of course, Apple is not to be out done and has recently announced plans to create iCloud access to iTunes.
As user numbers grow, in the online music space, data usage will increase. These services all rely on data streaming to the end users devices. With the age of data caps and fees for data overages upon us, Pandora’s model may not prove the most resilient.
With growing competition from Google (NASDAQ:GOOG), Amazon (NASDAQ:AMZN) and Apple (NASDAQ:APPL), as well as projected losses through 2012, one should take pause. Pandora has yet to turn a profit and has shown a loss of $6.8 million on revenue of $51 million in Q1 of 2011. Not to mention the growing demand for bandwidth which will lead to a crackdown on data usage in the not to distant future.
Why then are so many investors lining up to purchase shares of the Pandora IPO? I think Tony Wible, analyst at Janney Capital Markets put it best: "There is scarcity value in social media IPOs, which is why many are getting fairly lofty valuation multiples," said Wible, "These companies are making money from momentum and not fundamentals, at least initially."
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Pandora offers its users an interactive radio experience either, for free while serving up ads or without ads at $36/year. Nevertheless, there is growing competition in this space from providers like Google and Amazon; both have recently launched cloud music services. Of course, Apple is not to be out done and has recently announced plans to create iCloud access to iTunes.
As user numbers grow, in the online music space, data usage will increase. These services all rely on data streaming to the end users devices. With the age of data caps and fees for data overages upon us, Pandora’s model may not prove the most resilient.
With growing competition from Google (NASDAQ:GOOG), Amazon (NASDAQ:AMZN) and Apple (NASDAQ:APPL), as well as projected losses through 2012, one should take pause. Pandora has yet to turn a profit and has shown a loss of $6.8 million on revenue of $51 million in Q1 of 2011. Not to mention the growing demand for bandwidth which will lead to a crackdown on data usage in the not to distant future.
Why then are so many investors lining up to purchase shares of the Pandora IPO? I think Tony Wible, analyst at Janney Capital Markets put it best: "There is scarcity value in social media IPOs, which is why many are getting fairly lofty valuation multiples," said Wible, "These companies are making money from momentum and not fundamentals, at least initially."
