Pandora Falls Back to Earth After Much Hyped Wall Street Debut

On Wednesday, streaming music service Pandora made its market debut, becoming the latest Internet company to go public.

But following the initial surge in share price after the opening bell on Wall Street yesterday, shares of Pandora are quickly running out of steam and hovering near the expected $16 per share range.

Pandora opened at $20 per share and ultimately closed Wednesday at $17.42. On Thursday, Pandora opened at $16.99 fell as low as $15.52 during the morning session.

“What’s interesting to me about Pandora is that it illustrates the broader trend of this year’s tech I.P.O. market,” Ira Cohen, a managing director at Signal Hill, tells the New York Times. “The I.P.O. market is a place of the haves and have-nots.”

But it’s unlikely that Pandora will become the hottest stock on Wall Street before it at least figures out how to be profitable. The company pays large royalties to record labels in order to stream songs and, as a result, Pandora’s overhead remains substantial.

According to analysts, Pandora will continue to struggle with profitability until it significantly increases the number of ads it serves and improves the way those ads are targeted.

“As the volume of music we stream to listeners increases, our content acquisition expense will also increase, regardless of whether we are able to generate more revenue,” Pandora acknowledged in it’s most recent securities filing.