What To Expect For The Pandora IPO Tomorrow

Michael Convente June 15, 2011 0

The long awaited Pandora IPO will go live tomorrow morning when the New York Stock Exchange opening bell rings at 9:30am EST.  Last week initial estimates of price per share hovered between $7 and $9, but Pandora has since raised its opening share price to $16, hoping to value the company at $2.5 billion.  While this is considerably less than Facebook, with reports indicating that the social media phenomenon values itself at $100 billion, Pandora is still set to make a grand entrance into the world of publicly-traded companies.

If the LinkedIn IPO can provide any foreshadowing, then tomorrow's Pandora IPO will likely follow this timeline: once the market opens, investors will swoop in, driving the share price up by at least 50%.  This assumes the opening price to the public remains at $16 per share, though the opening price has the potential to double in pre-hours trading (as did LinkedIn, which had an initial price set at $45, only to see it jump to $80 by the time the general public was allowed to purchase shares).  Shares of Pandora will likely be quite volatile throughout the day as day traders aim to make a quick buck.  Overall, I predict the final closing price after the first day of trading to be around 10-20% higher than the opening price (again, similar to LinkedIn).

The important question of course is what happens in the first few weeks of trading.  Since the start of trading on May 19th, LinkedIn's share price has actually decreased about 4.5%, with a closing price at $76.34 today.  And this is actually $6 more per share than the early 52-week low, which went as far down as $70.50.  LinkedIn stock hit a high of $122.70 its very first day of trading (which would equal about a 50% increase from the initial share price of $80 available to the public), but this price only existed for a few minutes before dropping sharply.  This trend should scare potential investors of Pandora a bit since unlike LinkedIn, Pandora is still losing money.  Not to mention that Pandora generates the overwhelming portion of its revenue from the volatile advertising market, so it will be crucial for company executives to develop innovative plans to generate additional revenue if the company wants to start generating profits and build value for shareholders.

Of course, all this caution is probably for naught, as investors seem desperate to start a new dotcom 2.0 revolution.  LinkedIn took the pole position last month, and a slew of Web 2.0 and social media companies are eager to follow.

Pandora will be listed on the New York Stock Exchange on Wednesday under the symbol "P".

Stay tuned to pnosker.com all day tomorrow to get the latest news on the Pandora IPO.

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