An activist with a 10 percent stake in Pandora is pressuring the company to sell itself (P)
Larry Busacca/Getty Images for Columbia Records
Shares of Pandora are up almost four percent in after-hours trading, after an activist investor launched a campaign to force the company to put itself up for sale.
In a letter addressed to Pandora's board of directors filed on Monday, Corvex Management's Keith Meister claims that his firm owns 9.9% of the company's stock, and expresses concerns "the company has been unable to date to translate its great product into a great business with an attractive public market valuation."
With Pandora's share price sagging, with big spending on acquisitions like TicketFly, and without a clear plan to growing the core internet radio business, Pandora "may be pursuing a costly and uncertain business plan," writes Meister.
He urges Pandora to hire an outside bank to explore a "value maximization process" that could include a sale.
Here's the important part:
We have become increasingly concerned that the company may be pursuing a costly and uncertain business plan, without a thorough evaluation of all shareholder value-maximizing alternatives. For the reasons set forth below, we urge the company to immediately engage an independent investment bank with a fresh perspective and without any prior history of advising the company to advise on a value maximization process – including the execution of a sales process – and to evaluate the results against other options including the risk-adjusted value of continuing to operate on a standalone basis.
It's been a tough stretch for Pandora: It hasn't been profitable since its 2011 debut on the public markets. And when Pandora cofounder Tim Westergren came on as CEO in a turnaround play, the stock tanked. All the while, competitors like Spotify, Apple Music, and Google Play are getting more competitive by the day.
A Pandora spokesperson shared the following response:
Pandora is on the cusp of realizing an extraordinary vision: fundamentally changing the way listeners discover and enjoy music, and the way artists build and sustain their careers. Pandora has a profitable core business, combined with a strong balance sheet. We are confidently investing to fully capture the massive opportunity ahead of us.
Our management team is in constant dialogue with shareholders about our business strategy and committed to delivering results and long-term value.