Pandora Announces Sale of 10 Million Shares Ahead of Apple iTunes Radio Launch (AAPL, P)
The company said it was taking advantage of the fact that shares have more than doubled this year and are up 24 percent this quarter.
If underwriters exercise an option to sell 2.1 million additional shares, the sale could raise $279 million in cash, which the company said it would use for general corporate purposes including working capital and capital expenditures.
Pandora’s available cash and short-term investments totaled only $68.9 million at the end of July which was down from $89 million in January according to The Wall Street Journal.
In August the company lowered annual earnings expectations to between break-even to five cents per share. Growing expenses, despite improving revenue caused Pandora to report a larger Q2 loss. One of the primary drivers of expenses has been higher royalty costs for songs streamed by a growing listener base.
All this comes just ahead of Wednesday’s launch of Apple (NASDAQ: AAPL)’s iTunes Radio in the U.S. Apple will be playing catch up with Pandora, the clear leader in Internet radio, but in the Securities and Exchange Commission filing announcing the stock sale, Pandora said it does not expect to sustain the rapid growth it has enjoyed in the past according to CNET.
The cautions concerning growth appeared in a section of the SEC filing detailing possible risks to investors who might buy the company’s stock.
With more than 200 million registered users, Pandora sits atop the Internet radio world, well ahead of its closest competitor, Clear Channel’s iHeart Radio with 30 million users. As CNET pointed out, however, being number one only accounts for seven percent of the U.S. radio listening audience.
For its part, Pandora has said it is excited about Apple’s entry into web radio saying it would help encourage more people to shift their radio listening habits to the Internet.
In a pre-launch side-by-side comparison of features and services between Pandora and Apple back in June, CNET concluded that while it was probably too soon to know the real impact Apple would have, clearly iTunes Radio had the potential to be a significant factor in the space.
Pandora shares were down more than five percent at $22.78 from Monday’s close of $23.99 in pre-market trading Tuesday.
At the time of this writing, Jim Probasco had no position in any mentioned securities.
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