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.
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.
“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.