Much beloved music streaming company Pandora is taking quite a beating in just its second day of public trading. After making its IPO yesterday, the stock price started to inch downward, but today that inching became a free fall . The Stock price fell 24% today to a bit over $13 per share. Additionally, it is still slumping in after hours trading.
The rush to sell was likely brought on my GTIG analyst Rich Greenfield, who labeled Pandora as ‘sell’. Greenfield cited a number of issues with Pandora’s business model that apparently persuaded many investors. Firstly, Greenfield feels that Pandora’s royalty fees are out of control. The fees paid to music labels already account for 50% of revenue, and that figure may continue to increase.
Greenfield’s other arguments revolve around competition. As people shift more and more to listening on mobile devices, it is possible they will spend less time with Pandora, and more with other services. Similarly, the first tier tech giants are getting into streaming and cloud sync products. Google, Amazon, and Apple are now offering their own similar services. Pandora may not be strong enough to weather the storm. Do you think Pandora is going to make it?