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June 8: Pandora pivots on its pivotal day

Pandora returns to the headlines today as yet another layer of outside involvement becomes a possibility for the audio company. The audio company’s future has been a topic of interest as an ever-growing number of parties consider getting involved with the business to varying degrees. Two new developments have emerged around this ongoing story today. To understand the ramifications of the latest news, here’s a summary of what has transpired to date for Pandora.

Today is critical for Pandora because it marked a date for possible investment from private equity firm KKR, which said it could invest $150 million in Pandora. The conditional investment was set to close no sooner than today, June 8. That date, first announced May 8, granted Pandora some time to work out a possible sale to Sirius XM, which would have changed if/how KKR would get involved. The satellite radio company and its parent company, Liberty Media, have been engaged in a months-long story dancing around a possible acquisition of Pandora. Earlier this week, we heard that Verizon was reportedly interested in making its own investment into Pandora. Depending on the outcome of the Sirius dealmaking, that possible investment could be made alongside one from KKR if Verizon does opt to move forward.

First up in today’s news, the latest rumor is that Sirius XM is reportedly changing its tune, now looking to make an investment of its own in Pandora rather than seek a full buyout. Sources told Reuters that Sirius XM is working on a private investment in public equity after price disagreements allegedly led to the end of acquisition talks. So far, we have no details about the terms of Sirius’ possible investment. The altered negotiations could still fall through or Liberty Media could object to any deal. Private investment in public equity (PIPE) deals mean that a company’s shares are sold in a private offering rather than a public secondary offering.

Second, Pandora and KKR have agreed to an extension for the pre-closing period for the equity firm’s investment. Although they companies agreed to a delay, Pandora’s statement the the news did not disclose how long the extension will be. However, it did state that “the KKR investment will close immediately following the expiration of this extended period.”

This grace period could allow extra time for Pandora and Sirius XM to work out an agreement. It also means that Pandora still has a window of flexibility to work out a deal that will put the audio company to the best advantage. Within the past year, Pandora introduced two new subscription tiers for on-demand listening. While this shift away from lean-back listening only means new revenue streams for the company, it does pose new costs in licensing and royalties.

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Anna Washenko

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