Pandora may be singing ‘Shop Around’ these days

Pandora Media has made its name in the streaming music world by letting people set up radio stations online that play music based on songs, music styles or musicians they like. I think Pandora itself might be a fan of Smokey Robinson and the Miracles, because, after all, you can never go wrong with Smokey.

And if there is one Miracles song Pandora likes above all others, it might be “Shop Around.”

That Smokey classic is appropriate to Pandora because according to a report in the Wall Street Journal, Pandora was doing just that, shopping itself around to potential buyers earlier this year. And it looks like Liberty Media made at least an exploratory offer to buy Oakland-based Pandora for $15 a share, or $3.4 billion.

Citing “people familiar with the matter,” the Journal said Liberty Media Chief Executive Greg Maffei made the bid as part of a “fishing expedition,” out of curiosity about somehow tying up Pandora with satellite-radio company Sirius XM Holdings, which Liberty controls. The Journal said Pandora’s board turned down the offer because it believed the company is worth closer to $20 a share, which is where the company’s stock traded last fall.

Pandora shares rose more than 3 percent Friday, to $12.41, one day after the company reported its second-quarter results. For the period ended June 30, Pandora reported a loss of $76.3 million, or 33 cents a share, on $343 million, compared to a loss of $16 million, or 8 cents a share, on $285.6 million in the same quarter a year ago. Total listener hours rose to 5.7 billion from 5.3 billion a year ago, but active listeners declined to 78.1 million from 79.4 million in last year’s second quarter.

Earlier this year, Pandora laid out plans to launch an on-demand streaming service that would be similar to that of rivals like Spotify, and the company set a target of reaching $4 billion in annual revenue by 2020. Along with its second-quarter results, Pandora said it had signed up more than two dozen independent labels for its upcoming on-demand music streaming service.

Benjamin Swinburne, who covers Pandora for Morgan Stanley, called the company’s results “a mixed bag,” but said that the deals with the independent labels “protect Pandora’s economics both in a new interactive environment as well as its core radio business.”

Pandora’s quarterly results came after what has been a year of unconfirmed reports, executive changes, dissatisfied investors and uncertainty at the Internet radio pioneer.

Earlier this year, various reports said Pandora had hired investment bankers to explore a possible sale of the company, and the Journal said Pandora approached Apple and Amazon about an acquisition. In March, Pandora replaced its chief executive, Brian McAndrews, with company co-founder Tim Westergren, who said that he believed the company’s best course was to remain independent.

Then, in March, Corvex Management disclosed it had acquired a 9.9 percent stake in Pandora, and called upon Westergren and Pandora to explore a sale of the company. Keith Meister, Corvex’s director and a protege of activist investor Carl Icahn, issued a blistering letter to Pandora Chairman Jim Feuille in which he called upon the company to explore an immediate sale and derided Pandora’s direction.

“(Westergren’s plans) indicate a business as usual approach at best,” Meister said. “At worst they suggest an unwillingness to consider a sale regardless of the price offered to shareholders or the cost and uncertainty inherent in a standalone business plan.”

With its largest shareholder singing that kind of a tune, it might not be too long before Pandora finds itself loaded up into a shopping cart and headed to the checkout line.

Photo: The building that houses Pandora’s headquarters in Oakland. (Doug Duran/Bay Area News Group)

 

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