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Big Pandora Investor Advocates Sale

Corvex Management LP is fed up with seeing the streamer's share price slide

OAKLAND, Calif.�Pandora Media�s largest investor is concerned about its future and recently sent a letter to the company�s CEO and board members asking them to�reconsider the company�s strategy and to explore the possibility of a sale.

Hypebot.comis reporting that�Corvex Management LP, the investor that�sent the letter, owns 8.3 percent of Pandora, and is�fed up with seeing the company�s share price slide.�The same article reports that the concerns include:

  • Pandora is �pursuing a costly and uncertain business plan, without a thorough evaluation of all shareholder value-maximizing alternatives.�
  • The fact that�senior management�has sold off most of its stock, which certainly doesn�t give an investor confidence in the company�s future.
  • The fact that the company replaced former CEO Brian McAndrewswith founderTim Westergren, a move panned by many in the industry
  • Concern over Pandora�s direct deals with rights-holders,�which were very costly.
  • And finally, Pandora�s poor stock price, which seems to have little hope of increasing.

Pandora is currently available only in the United States, Australia and New Zealand; other countries have blocked entry because of �local rights issues which have proved too costly for the company to overcome.� Turning into anon-demandstreaming service, like Spotify, would allow Pandora to expand, since most of the required record label licenses would be world-wide and �wouldn�t depend upon local broadcast regulations.�

Let�s also consider�David Pakman�s articlepublished May 10, which focuses on�Pandora and other digital music streaming companies.�He writes:

�This bleak outlook for profitability among standalone digital music companies is a direct result of the high royalty rates incumbent upon startups who wish to license digital music for use in their apps. Whether you negotiate voluntary agreements or avail yourself of the existing compulsory licenses, you will not turn a profit. At least, no one ever has. The few that refused to pay these rates were often sued out of existence.

�Given these facts, digital music startups are unlikely to survive and thus unlikely to attract meaningful investment.

�Pandora is the largest internet radio company, with more than 81 million monthly active listeners. Even with this extraordinary scale?�?more than one-quarter of all Americans listen each month?�?the company is unable to generate a profit. And while many of its investors have made large returns on their invested capital through stock sales at higher prices than their cost basis, the company continues to remain unprofitable, even at the very large scale it currently enjoys.�