What, me worry? Like Mad magazine’s hapless icon Alfred E. Neuman, Pandora investors appear to have adopted a carefree attitude.
Shares of the online music service climbed 5 percent on Tuesday to close at $25.19 — the highest since its IPO in June 2011 — on a day when investors were hit with a steady drumbeat of negative news.
The rally came on the eve of Apple’s launch of a Pandora-like music service, with initial reports suggesting Apple is milking its close relationship with music labels to promote their hot up-and-coming artists through its ad-free iTunes Radio.
Beyond Apple, the company’s biggest shareholder, Crosslink Capital, disclosed that it’s selling 4 million shares, or roughly 14 percent of its 29 million shares. Crosslink is selling as part of a stock offering that will raise about $230 million for Pandora while diluting existing shareholders.
Pandora said it will use the proceeds to open local ad-sales offices to better compete with radio stations. Last week, the company tapped digital ad veteran Brian McAndrews as its new CEO.
Even so, Wall Street analysts were scratching their heads over investors’ seemingly boundless optimism.
“Pandora is a hold and the easy money was already earned by value investors,” Rich Tullo, an analyst with Albert Fried & Co., said in a research note to clients.
Tullo wasn’t alone. S&P analyst Tuna Amobi also reiterated a “strong sell” of Pandora, noting that the company was still haggling with record labels of royalty payments to stream songs.
“Despite market’s initial reaction to new CEO appointment, we remain circumspect on potential royalty battles vs. the music industry,” he wrote in a report.