Pandora shares plunge below IPO price as Internet-stock frenzy cools
Wall Street may have had its fill of new Internet-related stocks for the moment.
Shares of online radio firm Pandora Media Inc. plummeted on their second day of trading Thursday as some investors suddenly fled for the exits.
The Oakland company’s stock dived $4.16, or 24%, to close at $13.26 -- 17% below the initial public offering price of $16 on Tuesday.
The stock had soared as high as $26 on Wednesday, its first trading day, mirroring the debuts of other new Internet issues this spring, including LinkedIn Corp., Chinese social-networking site Renren Inc. and Russian search engine Yandex.
Investors’ hunger for the current crop of Internet stocks has echoed the late-1990s dot-com boom, although the market today seems far less frothy that the worst excesses of the dot-com era.
Still, rushing to buy the stocks just as they hit the market has proved to be a fool’s game, a point that seemed lost on investors who crowded into Pandora on Wednesday.
Last month, LinkedIn and Yandex both pulled back in their first few days of trading from their highs, although those stocks still are above their IPO prices.
On Thursday LinkedIn tumbled $6.35, or 8.5%, to $68.27, but the stock remains 52% above its IPO price of $45. The shares rose as high as $122.70 when they began trading May 19.
Yandex edged up 26 cents to $30.53 on Thursday. It’s down 27% from its peak of $42.01 on May 24, its first trading day, but up 22% from its IPO price of $25.
Pandora’s crash was much more spectacular. It’s typically a black eye for a company, and its Wall Street underwriters, for a new stock to fall below the IPO price soon after it begins trading.
Pandora had expected to go public at $7 to $9 a share, then raised the expected range to $10 to $12 last week. Apparently facing strong demand, the company’s underwriters boosted the IPO price to $16 when the deal was launched Tuesday.
Pandora has attracted more than 90 million registered users to its personalized radio service. But the 10-year-old company still hasn’t turned a profit, an issue heavily discussed in stories about the business this week. That may have encouraged more investors to abandon the stock once they saw it losing altitude at a fast pace in the first two trading days.
The stock held around the IPO price of $16 for much of Thursday, suggesting that the company’s underwriters were stepping in to support it. But the price crumbled in the final 90 minutes of trading.
It was a down day for many Internet-related stocks in general. Renren sank 74 cents, or 9.8%, to $6.78, continuing its recent meltdown. Google Inc. slipped $2.58, or 0.5%, to $500.37, its lowest price since September.
And after the closing bell, BlackBerry maker Research in Motion Ltd. shares sank after the firm gave a disappointing sales forecast. The stock slumped to $30.43, down 14% from Thursday’s closing price of $35.33.
-- Tom Petruno
Top photo: A banner for Pandora Media Inc., the online-radio company, hangs in front of the New York Stock Exchange walk on its first day of trading as a public company on June 15, 2011 in New York City. Credit: Spencer Platt, Getty Images
Bottom photo: Pandora CEO Joseph Kennedy, left, and founder Tim Westergren, on the NYSE floor on Wednesday. Credit: Ramin Talaie / Bloomberg News