Personalized radio streamer Pandora has filed for its long-expected IPO and is seeking to raise $100 million from its stock sale, according to an SEC filing. The filing shows a company operating at a loss but with advertising revenues rising dramatically.
According to the filing, the company recorded a $328,000 net loss during the first nine months of 2010 on revenue of $90.1 million. The same time frame the year before, Pandora lost $18.6 million on $17.8 million in revenue. For FY2010, Pandora brought in $55.1 million — $50 million from advertising and the rest from subscriptions and other — but lost $16.7 million on expenses of $70.6 million. By comparison, revenues for FY2009 totaled $19.3 million with a loss of $28.2 million on expenses of $46.7 million. By far, the largest expense is content acquisition: $32.9 million in FY2010.
In preparation for the IPO, earlier this month, Pandora named former News Corp (NSDQ: NWS). COO Peter Chernin and former Netflix (NSDQ: NFLX) CFO Barry McCarthy to the board.
The company’s risks to investors include caveats about its “relatively new, evolving and unproven business model”; its ability to hold on and grow its 80 million-plus registered U.S. listeners; the possibility of changing licensing deals with music publishers which could cut into profits; and the uncertainty about its ability to capitalize on mobile advertising’s rise.
Pandora has made several moves over the past few months to reduce its reliance on mobile advertising. In September, after rolling out its own ad platform for the iPad in June, Pandora expanded its audio ad network to include products beyond the PC and the smartphone by offering ad inventory on in-home connected devices such as TVs, BluRay disc players, table-top radios and other digital media players.
The company has raised five rounds of funding since it formed as TheSavageBeast.com back in January 2000; it changed its name to Pandora five years later.
The base salary of CEO Joseph Kennedy was increased from $300,000 to $325,000 in the past year; that will rise again to $400,000 next year. Meanwhile, Chief Revenue Officer John makes $350,000 annually and that is slated to remain unchanged. Pandora’s compensation committee also approved the largest bonus payment, in the amount of $175,000, to Kennedy. Trimble also gets a commission based on sales amounting to 100 percent of its base salary. The summary compensation table identifies Kennedy’s total compensation for fiscal 2011 as $503,829, while Trimble’s is $1.4 million.
The company hasn’t decided how many shares will be offered or what the price range will be for each share. The bookrunning managers of the proposed offering will be Morgan Stanley and J.P. Morgan Securities . Co-managers will be William Blair and Company, L.L.C. and Stifel Nicolaus Weisel.
The announcement of Pandora’s proposed IPO, made late on a Friday afternoon, follows several notable media filings in the past few months. And it surely comes ahead of many more this year.
Last month, both Nielsen and Demand Media (NYSE: DMD) filed for their IPOs. Although there was a lot of talk about IPOs this past year, it was all mostly talk and then pulling back. In its analysis of the 2010 media deals marketplace, Petsky Prunier counted only 18.
Dow Jones VentureSource, which looks at all industries, not just media, recently tallied up 445 M&A deals that raised $33.9 billion in 2010, compared to 381 transactions that raised $20.8 billion in 2009. The number of IPOs across all business sectors showed 46 venture-backed IPOs in 2010, compared to only 8 in 2009. DJ VentureSource is confident that 2011 will produce even more M&A activity and a jump in IPOs too.