FI516 IPO Paper Identify the company and its industry. Pandora Media, Inc. is an internet streaming radio service used by more than 80 million listeners. Pandora, which has a catalog of 800,000 songs from more than 80,000 artists, has roughly half the market for Internet radio in 2010, according to a study published in November by Ando Media. Though the service is wildly popular, it has yet to make a profit. The Internet radio station generates playlists based on a user’s favorite artist or song.
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As part of the company’s Music Genome Project, songs are analyzed according to musical features — including details of instrumentation, harmony, lyrics, melody, rhythm, and vocals. Users enter the name of a song, and Pandora creates a playlist of songs with similar characteristics. Pandora’s service, free to its more than 80 million registered users and available only in the US, is supported by local and national advertising. Pandora chief strategy officer Tim Westergren founded the company in 2000 and it filed for an IPO in 2011.
Discuss important financial and other facts about the company from its SEC filings. In its papers filed with the Securities and Exchange Commission, Pandora reported a $16. 8-million loss on $55. 2 million in revenue for its fiscal year ended Jan. 31, 2010. From Feb. 1, 2010 through Oct. 31, Pandora narrowed its losses to $328,000 on $90. 1 million in revenue. Because Pandora is largely a free service, only 9% of its revenue in the fiscal year ended Jan. 31, 2010 came from subscriptions and other paid services.
The vast majority of the company’s revenue came from advertising. Others facts that should be noted are: * Proposed amount to raise is $100 million. * Revenue for the 9 months ended October 31, 2010 was $90. 12 million. That’s an increase over 30. 1 million over the same months in 2009. * Net income in the first 9 months of 2010 was…a loss of $328,000. Pandora lost $18 million during the same months in 2009. * Pandora has more than 80 million users in the US. * During the first nine months of 2010, Pandora ad revenue reached $78 million.
That’s up from $29 million during the same period in 2009. That’s huge growth. * Subscription revenue was $12. 3 million during the first 9 months of 2010. It was $4 million during the first 9 months of 2009. That’s huge growth. * Pandora founder Tim Westergren only owns 2. 39% of the company. CEO Joseph Kennedy owns 2. 71%. * Morgan Stanley chosen as book runner. * Risk factors are, basically, Pandora’s ability to keep people listening. * Pandora CEO Joseph Kennedy will make a $325,000 salary in 2011. His 2010 bonus was $503,829.
How successful was the IPO in raising capital? Even now, though, Pandora is no sure bet. The company lost $328,000 in the first three quarters of last year and expects to rack up more operating losses until at least 2012. Pandora also faces increased competition as more music moves online. CBS Corp. and Clear Channel Communications Inc. have Internet- streaming products, and Skype Technologies SA co-founder Janus Friis raised $17. 5 million for a social-music service called Radio Inc. earlier this month.
Pandora also said in the filing that its auditor has identified “material weakness” in the way it handles financial reporting. Pandora said it’s working to remedy the concerns. Pandora indicated it would raise $100 million with an initial public offering stock. That figure will likely change as bankers gauge the demand to invest in or an 11-year-old company that has helped change the way people listen to music. A target price for the shares won’t be set until the IPO is closer to happening. The offering probably won’t happen for at least three months.
Pandora’s decision to go public is the latest sign that Internet companies sense the time is ripe to mine the markets for money amid growing excitement about digital media and online networking. What is the trend in the stock price of the company since the IPO? Pandora has only filed a preliminary prospectus that lacks a few details we need to compute a per-share Intrinsic Valuation. However, it has been estimated on a preliminary basis to have an IV of $700m to $1B. Many investors, particularly institutions, remain wary of investments in entertainment companies.
But at the same time they find it hard to resist large revenue growth in an area where big players, including Apple and Google, have strong interests. Pandora has some key advantages over competition in the consumer experience and in monetization. This puts them in a good position in terms of the ad-supported streaming business. Early enthusiasm might push the shares beyond our IV estimates. The rapid adoption of Internet Radio has created an optimistic outlook for rapid growth and future development of Pandora. Many investors, particularly institutions, remain wary of investments in entertainment companies.
But at the same time they find it hard to resist large revenue growth in an area where big players, including Apple and Google, have strong interests. Pandora has some key advantages over competition in the consumer experience and in monetization. This puts them in a good position in terms of the ad-supported streaming business. Ownership Table Compensation Table References: http://www. businessinsider. com/live-pandoras-ipo-filin-2011-2 http://paidcontent. org/article/419-pandoras-ipo-filing-copyright-fees-eat-up-half-its-revenues/ http://news. cnet. com/8301-13577_3-20031607-36. html