Thursday, December 3, 2015

Pandora Shares Drop On News Of Debt Offering

Pandora isn’t going to be able to fund its aggressive global expansion with thin air.

As reported by Music Business Worldwide, the firm has a gameplan to move into interactive streaming and launch in Europe in the coming months and years.

That’s after it paid a gigantic $450M for US independent ticketing operation Ticketfly, and ponied up a further $75M to buy key assets from bankrupt Spotify rival Rdio.

At the end of Q3 – before its swooped for the Rdio deal – Pandora had $442.6m in the bank, and no debt.

That’s obviously that’s not enough for what it has in mind, because the firm’s just raised a further $300M through a convertible debt offering, due in 2020.

In plain English, convertible debt is when a business borrows money from investors or a group of investors, which then becomes debt – with an intention of converting this debt into equity down the line.

Pandora now expects to grant Morgan Stanley, the initial purchaser of the notes, a 30-day option to purchase up to an additional $45 million-worth of convertible debt.

Wall Street is clearly a little worried by Pandora’s decision to raise funds at this stage in this way.

Pandora’s share price fell 5.4% overnight to $13.50 on the NYSE after the announcement was made.

Perhaps that’s because fears have been triggered over the Copyright Royalty Board’s decision – due later this month – regarding the US statutory rate that ‘webcasters’ like Pandora will have to pay labels from 2016-2020, report Music Business Worldwide.

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