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Summary:

More than a decade after it was started by Tim Westergren and cohorts, Oakland, Calif. based Pandora Music completed an initial public offering that saw the company raise about $235 million at about $16 a share. The company started trading at $20.30 a share.

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More than a decade after it was started by Tim Westergren and cohorts, Oakland, Calif. based Pandora Music completed an initial public offering that saw the company raise about $235 million at $16 a share.

Pandora’s management team rang the opening bell today at the New York Stock Exchange. Pandora stock opened at $20 a share and started trading at $20.30 a share, giving the company a market capitalization of over $3 billion – not bad for a company that has never made a dime in profits and has been subject of negative press attention as such. The stock is trading at around $23 a share at the time of writing.

Pandora is part of a new wave of Silicon Valley companies that are tapping the public markets, leading to talk of a technology bubble. LinkedIn and Fusion-io are two companies that have also tapped the public markets recently.

Benchmark Capital partner Bill Gurley believes that “The buy side of the market has been desperate for more product” and as a result there is demand for initial public offerings. These IPOs are going to inspire other companies to go public as well.

With the exception of those two, the tech IPO market for 2011 isn’t doing too well according to Deutsche Bank research. In a note to their clients last week, investment bank’s Ted Tobiason wrote:

Two more tech IPOs priced this week bringing the total number of issues for the year to 22 with proceeds of $5.8bn. This compares to 10 tech IPOs at this time last year raising $1.0bn. However the market is showing some signs of stress. Of the 50 tech IPOs that priced in the last twelve months, 40 have traded down in the last 30 days (or since pricing) and 10 have traded up. The average performance over that period is (14.6 percent). While tech IPO investors have made just shy of $420mm buying tech IPOs year-to-date, half of these deals are currently below issue and the bulk of that performance has been driven by just two deals. If we take the gains of just those two deals we have $610mm with $190mm in losses for the aggregate of the remaining 20 deals.

So what kind of deals are doing well? Three variables stand out: 1) category leaders are outperforming, 2) deals with top line growth greater than 20 percent are outperforming, and 3) China is underperforming.

Photo courtesy: Instagram user, Kate8

  1. I must say I don’t get it. I can pay Pandora, or listen to ads, or
    I can listen to BlueBeat (bluebeat.com) ad-free at no cost. I just don’t see the Pandora upside.

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    1. I agree. Its got 800k songs, limited customization options (in contrast with Slacker, my choice) and has never made a profit. Pandora claims 90 million registered users, but in ten years how many of those have moved on to better, richer music streaming services?

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  2. Nice pic at the top! Glad to see you sourced it from Instagram. Very cool.

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  3. such growths among ipos is a welcome development but we should be mindful of market reaction in the long term. adequate mechanism should be put in place to enable the market withstand over heating that leads to stress.

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  4. I don’t like the attraction to IPO’s by the typical investor, honestly. The big boys get PRE IPO pricing and are always ahead of the game. And that leaves you competing with hype infested traders/investors hoping to have the next big thing. Stick to plays with chart data so you can at least see where support & resistance is. Our picks are up near 40% in less than 2 months because we use chart data to limit risk. 8)

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  5. Vincent Clement Wednesday, June 15, 2011

    I believe that Pandora is worth more than some record companies.

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  6. Headed for another bubble burst?

    Pandora didn’t allow playing what I wanted, only something in the same genre, so it’s been deleted from my smartphone.

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