Pandora files for $100 million IPO

tim_westergren_pandora.gi.top.jpgPandora founder Tim Westergren. By Stacy Cowley, tech editor


NEW YORK (CNNMoney) -- Internet radio site Pandora filed late Friday to raise up to $100 million in an initial public offering.

This offers the first public look at the company's finances -- and Pandora isn't yet profitable. The popular site posted a net loss of $328,000 on revenue of $90.1 million in the first nine months of its most recent fiscal year. In the fiscal year ended Jan. 31, 2010, it lost $16.8 million on sales of $55.2 million.

Its biggest expense is the royalties it pays for the music it streams. As Pandora's audience grows, so do those costs, which reached $45.4 million in the first nine months of 2010. That is twice what Pandora spent on them in the same period a year earlier.

And the Oakland, Calif.-based company's business is growing fast. As of last month, Pandora had 80 million registered members and was averaging a new one every second. Those members racked up 2.6 billion hours of listening to Pandora's song stream in nine-month stretch that ended Oct. 31.

Founded in 2000 as the Music Genome Project, Pandora uses algorithms and user feedback to generate music recommendations for its listeners.

The company claims a 50% share of all Internet radio listening time among the top 20 stations and networks in the United States, according to a November 2010 report by audience measurement firm Ando Media.

Pandora offers listeners two options: A free, advertising-supported stream or a "premium" plan priced at $36 per year, which offers higher audio quality and no ads.

The premium plan is a growing moneyspinner: It generated $12.3 million in the first nine months of 2010, up from just $2.6 million a year earlier. But advertising is by far Pandora's biggest revenue source. The site took in ad sales of $77.9 million in the first nine months of 2010, up from $28.7 million during the same timeframe a year earlier.

Pandora currently has 295 employees and a cash stash of $40.7 million. The site is backed by more than $55 million in venture capital from investors including Crosslink Capital, Greylock Partners, Hearst Interactive Media and Allen & Co.

Pandora founder Tim Westergren currently holds a 2.4% stake in the company he created nearly a decade ago. CEO Joseph Kennedy holds 2.7%. Both sold off some of their holdings to private investors last year in a tender offer priced at $3.138 per share of stock. Those sales netted $2.2 million for Westergren and $2.5 million for Kennedy.

Pandora is one of a growing number of tech companies looking to go public.

Online content creator Demand Media (DMD) raised $67 million last month in an IPO that valued the company at more than $1.5 billion. Business social network LinkedIn filed in late January for its IPO, revealing a profit of $10 million for the first nine months of 2010 on sales of $161 million.  To top of page

Frontline troops push for solar energy
The U.S. Marines are testing renewable energy technologies like solar to reduce costs and casualties associated with fossil fuels. Play
25 Best Places to find rich singles
Looking for Mr. or Ms. Moneybags? Hunt down the perfect mate in these wealthy cities, which are brimming with unattached professionals. More
Fun festivals: Twins to mustard to pirates!
You'll see double in Twinsburg, Ohio, and Ketchup lovers should beware in Middleton, WI. Here's some of the best and strangest town festivals. Play
Index Last Change % Change
Dow 17,123.29 16.59 0.10%
Nasdaq 4,571.44 0.80 0.02%
S&P 500 2,000.10 0.08 0.00%
Treasuries 2.37 -0.02 -0.84%
Data as of 1:44pm ET
Company Price Change % Change
Bank of America Corp... 16.22 -0.11 -0.67%
Apple Inc 101.96 1.07 1.06%
Facebook Inc 75.18 -0.78 -1.03%
Yahoo! Inc 38.18 0.39 1.03%
Pfizer Inc 29.52 0.31 1.06%
Data as of 1:29pm ET

Sections

Standard General, largest investor for troubled electronics retailer, in talks to give RadioShack cash infusion it needs More

If we want to narrow the wealth gap, we need a better path to homeownership for low-income families. More

Alibaba reported a monster threefold increase in profit ahead of its highly anticipated initial public offering. More

Utah State professor Michael Glauser cycled 4,000 miles this summer, visiting 100 entrepreneurs across the country. Here's a snapshot of how they grew their businesses. More

Mary Fallon, from Durham, Maine, is a mother of three children, two dogs, 25 chickens and a flock of 22 sheep. Here are journal entries from a day in her life. More

Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.