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Pandora Shares Fall Sharply, Then Recover, As Spotify Hits the U.S.

Pandora (NYSE: P) may have gone public just in the nick of time. With rival Spotify’s long-awaited U.S. arrival finally at hand, Pandora shares took a hit on Thursday, plunging six percent right out of the gate before recovering. Spotify’s debut escalates competition in the digital music market and knocks Pandora from its perch as the hottest streaming service on the internet.

Earlier this week, Pandora held its first analyst day as a public company, and touted its growing user-base and expanding partnerships. The company now has 100 million registered users, up from 90 million in April.

But Spotify, which is launching with all four major labels on board — Universal, EMI, Sony (NYSE: SNE) and Warner Music Group (NYSE: WMG) — looms large over Pandora. (I’ve used the free versions of both services and Spotify has a superior product, in my opinion.) Pandora shares had pared most of their losses in midday action Thursday, trading down 0.84 percent to 17.78.The company went public at $16 per share last month, raising $235 million, but its stock has fallen steadily from over $19 this week ahead of Spotify’s arrival.

Pandora is an established service in the U.S., but Spotify is hoping that the cumulative effect of years of buzz over its arrival — driven by music and tech bloggers who have been feverishly speculating about its U.S. debut — will attract users in this country.

Meanwhile, both companies face competitive threats from the likes of Apple (NSDQ: AAPL) and Google (NSDQ: GOOG), not to mention radio titan Clear Channel (OTCBB: CCMO), which has upgraded its own streaming service, iheartradio, to include playlist features.

Spotify USA head Ken Parks discussed the company’s U.S. launch with paidContent on the eve of its debut.