Pandora executives probably think that their public offering couldn’t get any worse; however, it certainly has. Today, the stock fell another 4.3% afterhours. Pandora’s IPO was just yesterday.
After hours, shares were traded for $12.69. That was after those shares closed at $13.26 today. The early surge yesterday brought the stock up to $26 and it looked like it would be as good for Pandora as it was for some of the other internet companies that have gone public in the last few weeks. That was not the case.
The problem lies in investor perceptions and confidence. Whether those fears are real or not stem from wondering if Pandora can be a profitable and sustainable business. One of the worries is that as Pandora acquires more customers for its streaming music service, the more it will cost in the company in licensing fees. Of course, there are other music services that have just launched, too, such as those with Amazon, Google, and Apple. The latter is probably the one that investors have to be more concerned with. Apple’s iCloud service lets users sync their music without having to upload it all. Apple also has licensing agreements with the major record labels.
While there has been a lot of speculation on whether or not a new tech bubble was forming, Pandora’s public offering stands as a reminder that some investors are simply not willing to wait on all internet businesses to pay off. This could also cause problems for other startups or at least give them a moment’s pause. Even companies that have already gone public, such as LinkedIn, could find that the market is not as enticing as it once was. According to Pew Internet, a new report on social networking finds that only 18% of all adult social network users are on LinkedIn, compared to 92% who are on Facebook. In addition, over half of those on Facebook check in on a daily basis, compared to 6% who sign into LinkedIn daily.
The next big public offering will likely be Groupon and it may have more problems than Pandora. It is quite successful, but it might not have the sustainability that investors will want to see. In addition, the email daily deal company has been through a lot of venture capital cash in a very short period of time.
Pandora’s “box” is open, but tomorrow will bring the answers as to whether that box will be overflowing or strikingly empty.