Largest shareholder urges struggling Pandora to sell itself to the highest bidder

Posted:
in iPod + iTunes + AppleTV
Activist investment firm Corvex Management is pushing streaming radio service -- and Apple Music competitor -- Pandora to seriously consider selling the company, instead of pursuing what it has dubbed a "costly and uncertain business plan."




Corvex is the single largest shareholder in Pandora with a 9.9 percent stake, or about 22.7 million shares, according to Reuters. Corvex is a hedge fund run by Keith Meister, a protege of billionaire activist investor and former Apple shareholder Carl Icahn.

"Despite its many strengths, [Pandora] has been unable to date to translate its great product into a great business with an attractive public market valuation," Corvex wrote.

The investment firm believes Pandora could garner interest at a "substantial premium" to its recent stock price. Pandora had a market capitalization of $2.29 billion on Monday, and Corvex believes potential buyers could include large Internet companies, phone makers, and media conglomerates.

In March, Corvex told Pandora management of plans to replace some of its board members, but withdrew that plan based on Pandora Chairman Jim Feuille's apparent willingness to consider a sale, according to The Wall Street Journal. The company subsequently appointed Tim Westergren, a former musician who spearheaded Pandora's music algorithm technology, as CEO.

Westergren initially indicated opposition to a sale. This surprised and disappointed Corvex, which led to this week's public call for the company to be sold.




Pandora said in response that it "has a profitable core business, combined with a strong balance sheet" and is "confidently investing to fully capture the massive opportunity ahead of us." It touted its constant dialogue with shareholders and commitment to achieving long-term value for them.

Pandora's shares are down more than 25 percent in 2016 and more than 45 percent year-over-year. Unlike other streaming services, which have negotiated deals with record labels to allow listeners to pick songs, Pandora has acted more like a radio station, playing songs that match a genre but not allowing customers to make selections. It is now playing catch-up and negotiating with record labels for the licenses it needs to offer more on-demand music services.

As of last fall, Pandora had 78.1 million active users, though most of those were free, ad-supported accounts. Apple Music, meanwhile, has more than 13 million paid customers, with no free tier outside of three-month trials and Beats 1 radio.

Pandora expanded into a new sector with the purchase of ticketing and digital marketing company TicketFly for about $450 million last year. Corvex cited that acquisition as an example of a "questionable capital allocation" decision in its letter.

Comments

  • Reply 1 of 16
    lkrupplkrupp Posts: 10,557member
    Pandora down, Spotify next. Hey, if AI Apple haters can wish Android was the only mobile platform available then I can wish for Apple Music to be the only choice in streaming music. It’s all about choice? Gimme a break.
    cali
  • Reply 2 of 16
    zroger73zroger73 Posts: 787member
    I wonder what effect, if any, this would have on the embedded Pandora app on millions of vehicles.
  • Reply 3 of 16
    msuberlymsuberly Posts: 236member
    The source is wrong. According to the 13-F filings, Corvex is the #6 largest holder of Pandora stock, with just under 1M shares. Matrix Capital owns 22.7M shares. 
    edited May 2016
  • Reply 4 of 16
    NY1822NY1822 Posts: 621member
    msuberly said:
    The source is wrong. According to the 13-F filings, Corvex is the #6 largest holder of Pandora stock, with just under 1M shares. Matrix Capital owns 22.7M shares. 
    yesterday's filing shows Corvex had over 19 Million Voting shares and an additional 3.6 non voting shares
    http://www.insidermonkey.com/insider-trading/filing-13dg/17406
    edited May 2016
  • Reply 5 of 16
    calicali Posts: 3,494member
    What could a Pandora acquisition add to Apple?

    I'm not suggesting they should, just wondering if it would add anything.
  • Reply 6 of 16
    isteelersisteelers Posts: 738member
    Dead man walking. Pandora had their shot, but the failed to monetize. By the time the negotiate their deals with the music labels it will be too late unless then can undercut on price or offer something no one else can.  I have heard that their music algorithms are very good, though they never worked great for me.
    mike1
  • Reply 7 of 16
    Maui*JoeMaui*Joe Posts: 6member
    cali said:
    What could a Pandora acquisition add to Apple?

    I'm not suggesting they should, just wondering if it would add anything.
    I had Pandora for a few years (paid account ) and switched to Apple Music when it came out. Pandora hands down has a better algorithm for picking songs for your created stations and then let's you tweek it from there. Apples stations repeat the same tracks more and can't be adjusted to your personal taste.  Your stations are also not stored for future use in Apple Music. I'm still staying with Apple Music for the streaming and OS integration but I wish the make your own station feature was as good as Pandora. I really don't use it and I would if it was better. 
    calicornchip
  • Reply 8 of 16
    Pandora selects music based on several hundred attributes, annotated by hand, most of which are technical, some of which are emotional. It's excellent data that could improve Apple Music's (already great) algorithms and curations. The problem with Pandora was that the only vector to get on a path was to name a single song or a single band. They never put any nuance into their interface - but the underlying data is something they invested in by contracting with thousands of professional musicians to do data entry!
    tdknoxjackansicalicornchip
  • Reply 9 of 16
    calicali Posts: 3,494member
    Maui*Joe said:
    cali said:
    What could a Pandora acquisition add to Apple?

    I'm not suggesting they should, just wondering if it would add anything.
    I had Pandora for a few years (paid account ) and switched to Apple Music when it came out. Pandora hands down has a better algorithm for picking songs for your created stations and then let's you tweek it from there. Apples stations repeat the same tracks more and can't be adjusted to your personal taste.  Your stations are also not stored for future use in Apple Music. I'm still staying with Apple Music for the streaming and OS integration but I wish the make your own station feature was as good as Pandora. I really don't use it and I would if it was better. 

    True but I'm not sure Apple would have to pay for that when they could improve their algorithms in-house.

    I was thinking the same thing though.
  • Reply 10 of 16
    volcanvolcan Posts: 1,799member
    According to Wikipedia Pandora is only available in New Zealand, Australia and the United States. Apple Music is available in 116+/- countries.
  • Reply 11 of 16
    lkrupp said:
    Pandora down, Spotify next. Hey, if AI Apple haters can wish Android was the only mobile platform available then I can wish for Apple Music to be the only choice in streaming music. It’s all about choice? Gimme a break.
    And when have "Apple haters" (more like haters of Apple fans who hate all other platforms and products) wanted Android to be the only mobile platform? Especially since most Android fans also own iPads and/or MacBooks? Never forget which side kicked who off their board of directors, which side threatened "thermonuclear war" over a "stolen product", and which side used lawsuits and threatened unheard-of licensing fees (at one point $35-$50 per device made) to try to intimidate OEMs from making Android devices. Add to that the behavior of a lot of tech media writers, a lot of developers, carriers and of course a lot of Apple fans and of course there is a ton of resentment and a desire to see Apple taken down a peg. But no one wants Google and Android to be to mobile what Microsoft was to PCs. On the other hand, PLENTY of Apple fans are convinced that iOS being the only game in town - despite the fact that 75% of the world's population cannot afford their devices, and that a lot of Apple's "ideas" and "innovations" for their own products kinda came from Google and/or Samsung, especially lately, even if it is never acknowledged - would somehow make the tech industry and the world a better place.
  • Reply 12 of 16
    isteelers said:
    Dead man walking. Pandora had their shot, but the failed to monetize. By the time the negotiate their deals with the music labels it will be too late unless then can undercut on price or offer something no one else can.  I have heard that their music algorithms are very good, though they never worked great for me.
    By that you mean they failed to do the impossible. One can't make profits with radio streaming unless they are already a large tech company who is able to allow streaming to piggyback on other services. Similar to how the only company that is actually making money in TV streaming is Netflix (and their margins are small). The rest are subsidized by conglomerates whose primary business is something else.
  • Reply 13 of 16
    They should listen to the activist investor. It is either sell on their terms now while they still have a high market cap, or face liquidation fire sale by a bankruptcy judge 3 years ago. Investors tried to tell Marissa Mayer the same thing a couple of years back and she refused to listen, and now they are discreetly fielding offers that are nowhere near what they could have gotten.

    Unless the anti-trust people step in, the entity most likely to buy Pandora is Google. They already bought Rdio for their algorithms, and would covet Pandora for their listener base. Unlike Pandora, Google can monetize Pandora's 60 million free tier users with data and ads by piping them through Google Play. If not Google, then perhaps Amazon, who bought video gaming service Twitch when the anti-trust folks stopped Google from buying it and incorporating into YouTube. Most people do not even know that Amazon Prime Music exists as a streaming service, even though it launched before Apple Music. They could use Pandora's users also, though they would have a degree of difficulty in getting those people to sign up with Amazon Prime I suppose, especially the free tier ones. (They could do a lot worse than giving the subscription tier Pandora users a free year of Prime.)

    Beyond Amazon and Google and of course Apple - who would be interested in Pandora's few paying customers - I cannot see who would be able to buy Pandora and still make a profit. 


  • Reply 14 of 16
    calicali Posts: 3,494member
    redstater said:
    lkrupp said:
    Pandora down, Spotify next. Hey, if AI Apple haters can wish Android was the only mobile platform available then I can wish for Apple Music to be the only choice in streaming music. It’s all about choice? Gimme a break.
    And when have "Apple haters" (more like haters of Apple fans who hate all other platforms and products) wanted Android to be the only mobile platform? Especially since most Android fans also own iPads and/or MacBooks? Never forget which side kicked who off their board of directors, which side threatened "thermonuclear war" over a "stolen product", and which side used lawsuits and threatened unheard-of licensing fees (at one point $35-$50 per device made) to try to intimidate OEMs from making Android devices. Add to that the behavior of a lot of tech media writers, a lot of developers, carriers and of course a lot of Apple fans and of course there is a ton of resentment and a desire to see Apple taken down a peg. But no one wants Google and Android to be to mobile what Microsoft was to PCs. On the other hand, PLENTY of Apple fans are convinced that iOS being the only game in town - despite the fact that 75% of the world's population cannot afford their devices, and that a lot of Apple's "ideas" and "innovations" for their own products kinda came from Google and/or Samsung, especially lately, even if it is never acknowledged - would somehow make the tech industry and the world a better place.

    BWAHAHAHAHA!!! Funniest comment I've read in months.

    Bad Apple! For kicking out Eric "the creep" Schmidt off the board after stealing and backstabbing the company.
    after Apple made BILLIONS for them.

    Mean Steve for threatening to go thermonuclear on a pack of scumbag thieves.

    Bad Apple for wanting to at least share their hard work with leeches for a small fee.

    Sorry but droid IS the windows of mobile. Where have you been the last 8 years?

    Seriously if someone robs your house I don't wanna hear you bitching about the thieves or what they stole.
    ESPECIALLY if the thief is a family member or close friend.
    edited May 2016 cornchipbadmonk
  • Reply 15 of 16
    jkichlinejkichline Posts: 1,369member
    redstater said:
    lkrupp said:
    Pandora down, Spotify next. Hey, if AI Apple haters can wish Android was the only mobile platform available then I can wish for Apple Music to be the only choice in streaming music. It’s all about choice? Gimme a break.
    And when have "Apple haters" (more like haters of Apple fans who hate all other platforms and products) wanted Android to be the only mobile platform? Especially since most Android fans also own iPads and/or MacBooks? Never forget which side kicked who off their board of directors, which side threatened "thermonuclear war" over a "stolen product", and which side used lawsuits and threatened unheard-of licensing fees (at one point $35-$50 per device made) to try to intimidate OEMs from making Android devices. Add to that the behavior of a lot of tech media writers, a lot of developers, carriers and of course a lot of Apple fans and of course there is a ton of resentment and a desire to see Apple taken down a peg. But no one wants Google and Android to be to mobile what Microsoft was to PCs. On the other hand, PLENTY of Apple fans are convinced that iOS being the only game in town - despite the fact that 75% of the world's population cannot afford their devices, and that a lot of Apple's "ideas" and "innovations" for their own products kinda came from Google and/or Samsung, especially lately, even if it is never acknowledged - would somehow make the tech industry and the world a better place.
    You really don't know the history of this.  Apple was first with the iPhone and it was found that Eric Schmidt was leaking the plans for iPhone to Google.  Android was going to be a Blackberry knockoff until the iPhone launched and then they scrambled to try to compete with it by slapping in a touch screen.  That's why a viable Android headset in the form we have today did not appear until late 2008: https://en.wikipedia.org/wiki/HTC_Dream

    Even from that page you can see how it was originally designed to be a Blackberry knock off.  Remember that the iPhone was announced in January 2007, a full 1-3/4 years before this was released.  Apple sold the first iPhone in June 2007.  There was NOTHING like it on the market for nearly two years.

    The Motorola Droid was a concerted effort by carriers and Google to try to compete with iPhone and was released in September 2010.  It was probably the first commercially successfully Android product but still resembled a Blackberry. This device went on sale AFTER the first iPad went on sale! https://en.wikipedia.org/wiki/Motorola_Droid

    If you like pictographs, here's a lovely one: http://www.applegazette.com/iphone/which-came-first-iphone-or-android/

    If you follow the history, you'll see that Eric Schmidt and Andy Rubin both stole IP from Apple and packaged it into Android in a similar way, they also stole Oracle's Java IP.  it's not in question which came first, but Android fans love to pretend that history didn't happen that way.
    badmonk
  • Reply 16 of 16
    cornchipcornchip Posts: 1,950member
    redstater said:

    Beyond Amazon and Google and of course Apple - who would be interested in Pandora's few paying customers - I cannot see who would be able to buy Pandora and still make a profit. 


    I was thinking maybe one of the carriers VZW/SPRINT or something like that. Not that whatever they did would work out.
    1983
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