Pandora Media, Inc. began the process of going public Friday afternoon, filing for an initial public offering (IPO) through underwriters Morgan Stanley & Co. and J.P. Morgan Securities. The company has not, however, announced the time frame for the IPO, the number of shares involved, or pricing information for those shares.
Indeed, Pandora hasn’t released a prospectus yet that informs investors of the opportunity and risks associated with investing in the company, but the filing with the U.S. Securities and Exchange Commission (the SEC) is the key first step for taking Pandora public.
Pandora is an online music service that streams music to users through “radio stations” that get built around a specific song or band, and then gets tweaked by songs that are users mark as songs the like or dislike. The company has built a very loyal following through the power of its algorithm, which effectively allows users to get a hand crafted radio station that exposes new music they are likely to appreciate intermixed with songs from their known and favorite bands.
In addition to the browser-based service Pandora launched under, the company also has successful iPad and iPhone apps, as well as apps on the Android and other platforms. It’s a rare success story in the world of online music distribution, especially considering the fact that major labels tried to crush the company out of existence by demanding more in licensing fees than it was possible to generate in ad revenue.
Those issues were eventually solved, however, and CNet noted that those loyal customers mentioned above turned into profitable customers starting in the 4th quarter of 2009, a key part of most (though not all) successful IPOs. The company currently generates money through ads in a free service and through an ad-free paid subscription.
One of this reporter’s Pandora stations, based on The Black Rebel Motorcycle Club (iTunes link)