More shares are being sold by current investors than by Pandora Media itself in the company’s soon-to-price IPO. So who is taking cash as the public investors come onboard?
Of the 8.7 million shares being sold by existing shareholders, far and away the biggest block is coming from Hearst Corporation. It will sell exactly half of its 8,734,506 shares: selling 4,367,253 and keeping 4,367,253. What Hearst does with its stake after that may not be known, since it will no longer be a 5%-plus shareholder of Pandora and subject to special SEC reporting rules.
Not selling any shares are the biggest current shareholders. Crosslink will still own over 22% of Pandora, nearly 35 million shares; Walden Venture Capital nearly 18% (28.5 million); Greylock Partners 13.5% (21.5 million); and Laborador Ventures over 8% (12.9 million). GGV Capital will not sell any of its 7.9 million shares, but the IPO will reduce its stake from slightly over 5% to slightly under the reporting threshold.
Only two of the 13 officers and directors are selling any shares in conjunction with the IPO. Exec. VP and Chief Technology Officer Thomas Conrad will sell 247,236 shares, but still have 2.3 million. Chief Revenue Officer John Trimble will sell 74,937 shares but still hold onto 704,333. Founder Tim Westergren will not sell a single one of his 3.6 million shares, nor will CEO Joseph Kennedy sell any of his 4.2 million shares. And a director well known to RBR-TVBR readers, former News Corp. COO Peter Chernin, is not selling any of his 1.2 million shares.
Depending on the final pricing, the IPO values Pandora around $1.3-1.4 billion.
As of April, Pandora claimed over 90 million registered users for its music streaming service, with a new registered user being added about every second. “We have more than a 50% share of all internet radio listening time among the top 20 stations and networks in the United States,” the prospectus claimed, based on data from Ando Media.
Pandora reported a net loss of $6.8 million for the first quarter of its current fiscal year, following losses of $6.8 million for the last full year. The prospectus says the company expects to continue to post a net loss at least through the current fiscal year.
RBR-TVBR observation: How does one value an Internet-based company that’s losing money? If and when Pandora turns cash flow positive it is always going to have much smaller margins than a successful broadcasting company. SoundExchange and RIAA will see to that.