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Pandora Falls Below IPO Price, Reversing Yesterday’s Gain

Pandora Media Inc., the online-radio company, fell below its initial public offering price amid concern it won’t grow fast enough to maintain the market value gained yesterday on the first day of trading.

The Oakland, California-based company fell $1.67 to $15.75 as of 10:15 a.m. in New York Stock Exchange composite trading. It earlier fell as much as 9.9 percent to $15.69.

Pandora’s increase on its debut gave it a $2.8 billion market capitalization. That valued the unprofitable Internet company at about 20 times last year’s sales, compared with about 2.7 times for Sirius XM Radio Inc. (SIRI), a subscription-based satellite-radio service that reached profitability last year.

“There’s probably froth there,” said Jack Ablin, chief investment officer at Chicago-based Harris Private Bank, which oversees about $60 billion and doesn’t hold Pandora.

Investors snapped up Pandora at its debut to take advantage of the biggest surge in Internet share sales since the dot-com boom a decade ago. A dozen Internet companies have gone public this year, the most in any year since 2000, at the height of the first wave of Web IPOs. Pandora also benefited from limiting the number of shares available for purchase to about 9.2 percent of those outstanding, compared with an average float of 24 percent for U.S. technology IPOs in the past year.

Photographer: Ramin Talaie/Bloomberg

Traders wearing Pandora Media Inc. jackets work on the floor of the New York Stock Exchange in New York, on Wednesday, June 15, 2011. Close

Traders wearing Pandora Media Inc. jackets work on the floor of the New York Stock... Read More

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Photographer: Ramin Talaie/Bloomberg

Traders wearing Pandora Media Inc. jackets work on the floor of the New York Stock Exchange in New York, on Wednesday, June 15, 2011.

“By restricting the offering, they’re creating a feeding frenzy,” Ablin said. “That helps the buzz, whether or not those valuations stay on the shares.”

Pandora sold 14.7 million shares at $16 apiece on June 14, raising $234.9 million in its initial public offering. That was above the top of the range of $10 to $12.

To contact the reporter on this story: Lisa Rapaport in New York at lrapaport1@bloomberg.net.

To contact the editors responsible for this story: Tom Giles at tgiles5@bloomberg.net.

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