In the history of music streaming services, Pandora is at the top of the music food chain. A household name, Pandora offers free music that evolves with your tastes. Whether your faves are as broad as country or as specific as southern acoustic rock, Pandora can predict your favorite genres.
Though you may be peppered with advertisements throughout your listening experience, you’ll have an option to upgrade for a monthly fee for ad-free listening. Additionally, the premium service allows users to download songs to put on a device, so you can play them offline.
Pandora at a glance
Over its nearly 20-year history, Pandora has achieved some notable success ranging from a name change (to Pandora Media in 2004) to an IPO on the NYSE in 2011. Other accomplishments include:
- An agreement with SoundExchange in 2008 to continue to receive royalty fees.
- Hit 200 million users and 70 million active members in 2013.
- Accounted for 70% of all internet radio listening in the U.S. in 2013.
- Removed its limitation on 40 hours per month of free listening in 2013.
- Received an acquisition offer from Sirius XM in 2018.
History of Pandora
Pandora Media, Inc. started as Savage Beast Technologies in 2000 by Will Glaser, John Kraft and Tim Westergren, with the idea to give each user an individualized music channel. Over the years, the company worked through various partnerships and licensing agreements to make a broad array of music available to users. The company launched its IPO in 2011 under the ticker symbol ‘P’.
If you had purchased $1,000 of Pandora stock at the Initial Public Offering (IPO) price of $16 per share in 2011, you would have watched it decline by over half in the next two years, only to skyrocket to $40 a share in early 2014. Then, you’d have witnessed it being bought out by Sirius XM in 2018 at just over $9 a share. Ultimately, you’d be left with a little over $562.
Why purchase Pandora stock?
Pros of Pandora stock
- The recent deal for Pandora allows for a “go-shop” provision, which allows Pandora to seek to compete for offers even though it’s already accepted the offer from Sirius XM.
- Sirius XM agreed to buy Pandora in an all-stock deal, where Pandora shareholders will receive 1.44 SIRI shares for each Pandora share they own.
- Unlike Pandora, SIRI has a much better balance sheet along with solid free cash flow and positive earnings.
- Potential synergies exist with cross-platform optimization.
Cons of Pandora stock
- Investors who purchased Pandora may not want to own the Sirius XM business model.
- The Sirius XM deal isn’t set to close until 2019.
- Both satellite and online music streaming services have been under enormous margins pressure over recent years from increased competition.
How to purchase Pandora stock
If you've decided Pandora stock belongs in your portfolio, you can do the following.
- Decide how much you want to invest
Determine the amount you wish to invest in Pandora at the current share price, but also what you’ll be holding should any buyout offer go through. While the total dollar value may not change, the number of shares you hold will likely be the difference if it is an all-stock deal.
- Choose the right broker
You can purchase shares of Pandora through any of the major brokerage firms. You can compare which brokerage offer the best options for research, fees, and service that suit your individual needs. If you need help choosing a suitable broker, you can check out Benzinga's picks for the 2018 Best Online Brokerage.
Place your order. When you’re ready to make the trade, place an order with your broker to purchase Pandora shares. Keep in mind that if a buyout goes through, the shares will no longer be available for purchase after that time. - Place your order
When you’re ready to make the trade, place an order with your broker to purchase Pandora shares. Keep in mind that if a buyout goes through, the shares will no longer be available for purchase after that time.
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Future outlook for Pandora stock
The Sirius XM and Pandora deal will go through as scheduled. Don’t be surprised if competition offers have the potential to drive the share price of Pandora higher. Should Sirius XM decline in share price, it will drag down the price of Pandora’s stock.
Final thoughts
Pandora shareholders are in a unique position, as they’ll soon be folded into another company. Each Pandora investor needs to determine whether he or she wishes to continue to be a part of this new venture or exit his or her current position at a premium to share prices prior to the buyout offer.
If you want to continue to own shares of Pandora into the deal, understand that the risks associated with owning stocks during mergers and acquisitions are very different than owning stock during normal times.