August 9, 2022

DealBook: Pandora Raises Target for I.P.O.

Tim Westergren, founder of Pandora.Thor Swift for The New York TimesTim Westergren, founder of Pandora.

With its initial public offering near, Pandora Media put up a bigger price tag on Friday.

The online music service increased its target price range to $10 to $12 a share, above its previous range of $7 to $9, according to its latest filing.

It also increased the size of its offering by a million shares to 14.7 million shares. At the top end of its range, Pandora is set to offer $176.2 million shares at a $1.9 billion valuation.

The company’s lead underwriters, Morgan Stanley, JPMorgan Chase and Citigroup, also have the option to buy up to 2.2 million additional shares.

Pandora, founded by the musician Tim Westergren, is an Internet radio service that allows users to create customized music streams.

Pandora’s latest jump comes amid increasing competition for shares in promising Internet start-ups. The professional social network LinkedIn, which went public last month, soared on its debut, more than doubling on its first day of trading. The company, which offered a small float of less than 10 percent, is now below the price at which it opened trading, but is still valued above $6 billion based on its market capitalization. LinkedIn’s splashy debut has encouraged many private companies, waiting to go public, to revise their estimates upward and in some cases change their timelines. Both Groupon and Zynga are working with bankers to submit a prospectus this summer, according to several people close to the companies who were not authorized to speak publicly.

The rising tide for Internet stocks is not lifting all I.P.O.’s, however. While several Internet companies, like LinkedIn and RenRen, raised their price targets on the road to their public offerings, several nontechnology companies have faltered. For instance, the luggage maker Samonsite raised $1.25 billion in its offering, a drop from earlier estimates. The world’s largest commodities trader Glencore went public in May with a highly anticipated $10 billion offering. Despite the fanfare, shares are now trading below its offer price.

According to recent data from Dealogic, American technology offerings are up 26 percent year-to-date. In contrast, the rest of the market is up about 12 percent.

Despite the enthusiasm for well-known Internet brands, several analysts have expressed caution that many of these companies are still struggling with profitability.

Pandora, for instance is not yet profitable, despite improving revenue. Last year, the company’s revenue more than doubled to $137.8 million, but it posted a loss of $1.8 million. The service is popular, with some 90 million users, but it has been bogged down by hefty royalty fees.

“As our number of listener hours increases, the royalties we pay for content acquisition also increase,” the company said in its filing. “We have not in the past generated, and may not in the future generate, sufficient revenue from the sale of advertising and subscriptions to offset such royalty expenses.”

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