Largest shareholder urges struggling Pandora to sell itself to the highest bidder
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.
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
http://www.insidermonkey.com/insider-trading/filing-13dg/17406
I'm not suggesting they should, just wondering if it would add anything.
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.
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.
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.