Pandora Sets IPO Terms; VC Shares Are Potentially Worth Over $950M

(Reuters) – Online radio company Pandora Media Inc. filed terms for $109.5 million IPO on Thursday, as it moves ahead with an offering that could tap into the recent investor enthusiasm for Internet stocks.

The company and its owners will sell 13.68 million shares at $7 to $9 apiece, according to an amended filing with the U.S. Securities and Exchange Commission. Pandora will sell 5 million of the shares.

At the mid-point of the proposed range, the offering would fetch $109.4 million, more than the $100 million the company had used as a preliminary amount in its first filing in February.

Pandora has raised about $65 million in venture capital since its founding in 2000, according to Thomson Reuters (publisher of peHUB). The Hearst Corp. and five VC firms now own 72% of the company, according to the regulatory filing. Hearst is the only one of the six that plans to sell shares during the IPO. (It expects  to sell 4,367,253 of its 8,734,506 shares, leaving it with a 2.75% stake following the IPO.)

After the offering, Pandora’s five venture backers will collectively hold 105.6 million shares, which would be worth $951 million at $9 per share. Pandora’s biggest shareholder is Crosslink Capital, which holds 34,964,928 shares (for a post-IPO stake of 22.03%); followed by Walden Venture Capital, which holds 28,468,309 shares (17.94%); Greylock Partners, which holds 21,450,675 (13.51%); Labrador Ventures, which holds 12,905,162 shares (8.13%); and GGV Capital, which holds 7,853,341 shares (4.95%), according to the IPO filing.

Oakland, Calif.-based Pandora, which runs an online service that allows users to stream free music based on feedback from the listener, was launched in 2005. Pandora, unlike other online streaming services, uses algorithms based on the Music Genome project — a database built by teams of musicians that analyzes songs — to select a playlist for its users.

The Hearst Corp, which beneficially owns 5.73 percent of the company, is expected to sell 4.4 million shares, the filing said.

Earlier on Thursday, online daily deal site Groupon Inc. filed with U.S. regulators to raise up to $750 million in an IPO, the latest in a series of Internet IPOs including LinkedIn Corp. and Russia’s Yandex.

Pandora, which had 94 million registered users as of April 30, more than doubled its revenue in the first quarter on strong advertising sales and steady subscription growth.

The Internet-radio company, which makes money mainly from selling airtime to advertisers and also from premium subscriptions under the Pandora One banner, reported fiscal 2012 first-quarter revenue of $51 million.

The company expects to list on the New York Stock Exchange under the symbol “P” after the offering. Underwriters are being led by Morgan Stanley, JPMorgan and Citi.

–Himank Sharma, Reuters

Additional reporting by Lawrence Aragon, peHUB