Pandora Media Inc. (P), owner of the biggest Web radio service, surged to its highest price since its initial public offering in June 2011, after announcing plans to raise about $231 million in a new stock sale.
Pandora gained 5 percent to $25.19 at the close in New York, the highest value since its IPO on June 14, 2011. Stock in the Oakland, California-based company has more than doubled this year.
The company is selling 10 million shares in the new offering as it seeks to open local sales offices to better compete with radio stations for advertisers. Last week, Pandora named digital ad veteran Brian McAndrews as chairman and chief executive officer. Some proceeds of the sale, estimated based on the Sept. 13 closing price of $23.99, will be used for purchases and developing new technology.
“We may use a portion of the net proceeds for potential acquisitions of businesses, products or technologies, although we have no current agreements or understandings with respect to any such transactions,” Pandora said in a regulatory filing yesterday.
Songza and Raditaz, both closely held music applications, are possible acquisition targets, Rich Tullo, an analyst at Albert Fried & Co., wrote today in a report. Pandora could also purchase businesses to build its ad-selling platform and expand into films and books, he said.
“Pandora’s Music Genome is really a very advanced search engine with analytics which can be applied to other media such as words in a book or dialogue in a movie,” wrote Tullo, who has a market perform or hold rating on the shares.
Crosslink Capital Inc., Pandora’s biggest stockholder, will sell an additional 4 million shares, according to the filing. Underwriters including JPMorgan Chase & Co. (JPM), Morgan Stanley (MS) and Wells Fargo & Co. (WFC) have a 30-day option to purchase an additional 2.1 million shares, potentially increasing Pandora’s proceeds to almost $280 million.
Crosslink Capital will remain Pandora’s biggest shareholder. The company will hold 25 million shares, or about 13 percent of the outstanding stock, after the sale, according to the filing.
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