If Pandora sells all its shares as expected in its upcoming IPO, the company will be worth $1.3 billion. However, is this valuation overly optimistic? Or does its pricing accurately reflect what the online radio and music recommendation service is worth?
While generally praised by users, Pandora faces significant hurdles. Most notably, Pandora is burdened by the financial demands of record labels, which expect compensation for allowing the website to stream their music. In the fiscal year ending January 31, 2001, Pandora lost $1.7 million of its $137 million revenue to music industry execs.
In spite of financial drains, Pandora has chosen an excellent window for an IPO. The website currently has over 700,000 tracks in its library and more than 48 million users who listen for 11.6 hours per month on average. In addition to these impressive figures, the service continues to grow rapidly with high customer satisfaction. We’ll see if the current Web 2.0 IPO craze makes Pandora’s shareholder’s mega-rich.