Pandora Media Inc., the Internet- radio company that’s preparing for an initial public offering, raised the amount sought in the sale by 43 percent to $176.2 million, as demand for shares of Web companies grows.
Pandora plans to sell 14.7 million shares for $10 to $12, according to a filing with the Securities and Exchange Commission today. The Oakland, California-based company earlier this month filed to sell 13.7 million shares for $7 to $9.
Demand for stock in Internet companies is increasing after professional-networking site LinkedIn Corp.’s shares more than doubled on their first day of trading and Yandex NV raised $1.43 billion last month in the world’s biggest technology IPO of the year. Groupon Inc., the top online-coupon provider, has filed to raise $750 million in an IPO after booking a 14-fold increase in sales.
The $11 midpoint of Pandora’s new price range would value the company at $1.76 billion. It’s selling 6 million of the IPO shares, compared with the 5 million it previously notified the SEC it would sell. Existing shareholders are offering 8.7 million shares.
Based on the new midpoint price and higher number of shares, Pandora will raise about $58 million in cash after paying underwriter fees, or about $9 million more than previously planned, the filings show. The company will use proceeds to pay more than $30 million of accrued dividends and the remainder for general corporate purposes.
Venture Backers
Hearst Corp., the New York-based publisher, plans to sell 4.4 million shares in the offering to pare its stake to 2.7 percent from 5.7 percent, according to the filing. The largest shareholders, Crosslink Capital, Walden Venture Capital and Greylock Partners, aren’t selling in the IPO.
Morgan Stanley, JPMorgan Chase & Co. and Citigroup Inc. are leading the offering. The shares will trade on the New York Stock Exchange under the symbol P.
Founded in 2000 by Tim Westergren under the name Savage Beast, Pandora has lost money for more than a decade with an accumulated deficit of $92.1 million. Revenue comes from selling advertisements that target users based on age, gender, home postal code and musical taste. The ads support the free radio service, and the company also sells subscriptions to users who prefer to listen without marketing.
Sales more than doubled in the three months ended April 30, and registered users topped 90 million, according to the filing. Pandora, which made about 87 percent of its revenue last year from advertising, increased revenue 33-fold since 2007 while booking net losses each year during the period.
Royalty Costs
Pandora’s net loss in the last quarter widened to $6.8 million from $3 million a year earlier, as spending on marketing and costs to acquire the rights to songs increased.
Advertising and subscription sales haven’t kept up with the content royalty costs that increase with usage, and that imbalance may affect future profitability, the company said.
