Pandora Media Inc. issued a warning regarding the slowdown of its business. The company proposed a follow-on offering of 10 million shares for capital expenditures. This was stated in a regulatory filing. The online streaming music company said that additional 4 million shares will be offered by the venture capital company Crosslink Capital Inc.
Pandora shares dropped almost 5 percent in after-market trading after it closed at $23.99 last Monday. In the regulatory filing, the company said that it doesn’t expect to sustain the fast growth it got in both listener hours and advertising revenue in the future. This would result to losses in the near term. Pandora shares have enjoyed a good year this year. The stock is up 24 percent in the current quarter and 161 percent so far in 2013.
Pandora predicts the net proceeds from the sale of the shares of common stock it is offering will be around $230.8 million. It is expecting to use the money to support future growth. The company is almost a decade old and has 72 million active listeners. It is one of the most popular streaming music companies in the world. It gets its profits through advertising but in recent years it has faced stiff competition from Apple, Spotify and Sirius XM Radio. In the regulatory filing, the company said that it expects its growth rate to drop due to the increased competition.
Pandora has been actively lobbying congress to recalibrate how royalties are paid to artists in order to decrease the amount of costs of licensing music. The more people use Pandora, the more expensive it would be to legally access the songs.
Last week, Pandora named Brian McAndrews as its new chairman and CEO. McAndrews used to be an advertising executive at Microsoft Corp. as well as venture capital firm Madrona Venture Group.