The Oakland company had set range of $10 to $12 per share last week, an increase from an earlier range of $7 to $9 per share. With a market eager for technology company IPOs, Pandora had also added about 1 million shares to the offering, bringing the total number of shares sold by the company and its investors to 14.7 million.
The IPO price sets Pandora's valuation at about $2.6 billion.
In an equity research report issued earlier this week, GreenCrest Capital Management LLC. said that Pandora would be overvalued at $10 to $12 per share. The report recommended investors look for $7.50 per share, which would place Pandora's market valuation at $1.2 billion.
"Pandora offers a unique value-proposition to users, providing a customized music listening experience over its algorithmic platform," the report said. "However, given the significant pressures expected in the industry, we believe Pandora's long-term relevance is dependent on its ability to improve overall audience targeting capabilities, develop new and creative ad formats for mobile and grow subscription conversion."
Pandora is getting attention because it is the latest tech company to do an IPO, on the heels of professional social networking firm LinkedIn and Renren, the "Facebook of China." Daily deals site Groupon filed plans for an IPO earlier this month and social games maker Zynga is reportedly set to file later this month.
As of April 30, Pandora had 94 million registered members, including 34 million active members who tune in monthly. That's more than double the number of the number of active members Pandora had in April 2010. For the latest fiscal year, which ended Jan. 31, 2011, Pandora members listened to 3.8 billion hours of programming.
Pandora lets members create personalized stations based on artists or genre. The service is free up to 40 hours of listening per calendar month. It costs 99 cents to continue unlimited listening until the end of that month, or $36 to upgrade to unlimited listening for one year.
Relatively few members subscribe. About 86 percent of Pandora's revenues come from advertising, and revenues have increased from $55.2 million in fiscal year 2010 to $137.8 million in 2011, which ended Jan. 31.
LinkedIn, which has a similar base of 102 million members, posted $15.4 million in net income in 2010. But in contrast, Pandora posted a net loss of $16.8 million for fiscal year 2010.
In fact, Pandora has mostly lived a hand-to-mouth existence financially since the company was founded in 2000 and has an accumulated deficit since that time of $92.1 million.
Pandora shaved that net loss to $1.8 million in fiscal year 2011, which ended Jan. 31, but lost $6.8 million in the first quarter, which ended April 30. It also expects to continue annual operating losses through fiscal year 2012, according to the company's latest filing with the Securities and Exchange Commission.
Some analysts are questioning whether Pandora can generate enough revenues from advertising, especially on mobile devices, to cover the music licensing costs that rises as the number of listener hours increases.
The company's content acquisition costs, mainly royalty payments to the music industry, were $69.4 million in the last fiscal year, compared to $32.9 million the year before.
But Pandora is betting on its front running role in an Internet audio market that is just starting to take off, especially with more listeners using mobile devices such as smart phones. In the last quarter, 60.3 percent of listener hours were on mobile devices.
"Pandora redefines radio by taking the very best of what makes broadcast radio so successful over the past 100 years and combining it with the capabilities which the Internet has uniquely enabled," chief executive officer Joe Kennedy said during an IPO "road show" presentation.
Other digital audio firms are also watching how Pandora fares Wednesday.
"We're rooting for companies like Pandora," said Daren Tsui, chief executive officer of mSpot Inc. of Palo Alto. MSpot, which launched in 2004, carved its own niche by providing "white label" music services for wireless carriers like Sprint and AT&T.
"I want them to be successful because it just shows our space is healthy," he said.
And Noah Shanok, CEO of Stitcher Inc., said Pandora going public validates the industry for companies like his, a San Francisco firm that is similar to Pandora, but instead offers on-demand Internet talk programs.
"It's the first IPO in our industry and there will be many more to come,'' Shanok said. "The industry is just only getting started."
Hearst Communications Inc., which publishes The Chronicle, is an investor in Pandora Media. For the latest updates PRESS CTR + D or visit Stock Market news Today
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