Pandora Media Inc, the biggest Internet-radio company, plans to raise as much as US$100 million in an initial public offering (IPO), aiming to capitalize on its growing audience and renewed demand for dot-com investments.
Morgan Stanley, JPMorgan Chase & Co, William Blair & Co and Stifel Nicolaus Weisel will handle the IPO, Pandora said on Friday in a filing with the US Securities and Exchange Commission. The Oakland, -California-based company didn’t say how many shares it would offer or at what price.
Founded in 2000 by Tim Westergren under the name Savage Beast, Pandora’s ad revenues surged during the past two years as its music application became one of the most popular on Apple Inc’s iPhone and Google Inc’s Android devices.
Sales more than doubled to US$55.2 million in the year ended January last year, and then jumped to US$90.1 million in the first three quarters of the following year. The service has more than 80 million users.
“They are almost a household name at this point,” said Brian Zisk, co-founder of the Future of Music Coalition, a Washington-based nonprofit that advocates for artists. “The whole concept that you can go out and have an IPO as an Internet music company is a great thing.”
More Internet companies also are moving toward IPOs. -LinkedIn Corp announced plans last month to raise US$175 million in an offering.
HomeAway.com Inc, the -vacation-rental Web site, is choosing bankers for an IPO, people with knowledge of the plans said this week, and the daily-deal site Groupon Inc is in talks with banks about going public, people familiar with the matter said last month.
“Management and their investors are clearly optimistic about IPO prospects this year,” said Lise Buyer, principal of the IPO advisory firm Class V Group.
Pandora is “a highly regarded consumer brand, which certainly could help with the deal marketing,” Buyer added.
The company’s growth has helped bring it closer to profitability. Its net loss for the nine-month period ended in October last year was US$328,000, compared with US$18.6 million in the year-earlier period.
Pandora offers its service for free and makes most of its money by selling advertisements to marketers, such as Hallmark Cards Inc and MillerCoors LLC, which target users based on age, gender, home ZIP code and musical taste. The company generates more than 86 percent of its revenue from ads, though it also has a subscription for users who prefer to pay for an ad-free service.
As more music goes online, Pandora faces increased competition from companies such as CBS Corp’s Last.fm, as well as startups like Slacker Inc, Spotify Ltd and Rdio Inc. Pandora also said in the filing that Apple, Facebook Inc and Google could offer competing services in the future.
The company’s biggest shareholder is venture firm Crosslink Capital in San Francisco, which owns 23 percent of the company. Walden Venture Capital, also in San Francisco, owns 19 percent, and Menlo Park, California-based Greylock Partners controls 14 percent. Westergren owns 2.4 percent and chief executive officer Joseph Kennedy has 2.7 percent.
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