Pandora IPO begins with a bang, ends with a whimper

Internet radio company's shares end first day of trading below opening price

First, I want to congratulate all the investors who took my advice and didn't buy shares of Pandora Media (NYSE: P) on Wednesday, when the company went public. You saved yourselves a lot of money.

It's fair to say that, relative to expectations, Pandora's IPO was a disappointment. Shares were priced at $16, opened at $20, quickly went to $26, and just as quickly fell back. The stock ended trading Wednesday at 17.42 (8.9 percent above the offer price) after falling as low as 17.35. Hardly an Internet IPO moonshot.

(Also see: Pandora ups IPO price again)

Still, the company raised about $96 million with the 6 million shares it sold, while existing shareholders unloaded another 8.68 million.

With a total of nearly 160 million shares outstanding (only about 9 percent of total shares were offered to the public), Pandora's market capitalization currently is around $2.8 billion.

It's hard to determine the take-away here. It'd be nice to conclude that investors refused to be manipulated by Pandora's underwriters -- Morgan Stanley, J.P. Morgan and Citigroup -- into a first-day buying frenzy because they soberly determined that an Internet radio company that's losing money and faced with rising costs might be a shaky bet, especially at inflated IPO prices.

In fact, I'll go with that as the reason why Pandora never really took flight in its ticker debut. At least not to the extent that LinkedIn did last month, when it reached as high as 122.70, nearly triple the $45 offer price, on its first day trading and finished at 80.00.

I'm not sure which Internet company IPO is up next; probably Groupon or Zynga. Either will be a sterner test for investors trying to stave off a new round of irrational exuberance.

Wednesday, though, was a victory for (relative) sanity.

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