Pandora Media Inc (NYSE:P)

A Drop in Pandora Media Inc (NYSE:P) after SiriusXM (SIRI) Deal

Pandora Media Inc (NYSE:P)

Today Pandora Media Inc (NYSE:P) hit a new 52-week low of $7.81 in inter-day trading. This new low is consistent with Pandora’s price action. Since the beginning of 2017, Pandora shares have closed each month at a lower price than it began the month with. What also serves as confirmation of lower lows are the volumes. Today’s volumes are over three times the 30-day, daily volume average of 10 million shares traded per day. Of note is the stock’s noticeable daily volume uptick after its price dropped below $10 in mid-May.

Cash for Convertible Preferred Shares

Interestingly, Pandora Media Inc (NYSE:P) last week announced last week an investment in the firm by SiriusXM (SIRI) radio in the form of convertible preferred stock. Terms of the agreement call for a total investment of $480 million in Pandora. Upon execution of the agreement, SiriusXM purchased $172.5 million of the convertible preferred shares with the balance to be invested in the future. The conversion price of the preferred stock is $10.50. That places the conversion price at a 14.2% premium to Pandora’s volume-weighted average price of the common shares for the 20 days preceding June 9, 2017.

Pandora is required to redeem the Series A preferred stock on the closing’s fifth anniversary for an amount equal to its liquidation preference plus all accrued and unpaid dividends. Pandora can also redeem the Series A preferred stock at any time after the third anniversary of the closing if the daily volume weighted average price of Pandora’s common stock is greater than, or equal to, 175% of the then-applicable conversion price for a period of at least 20 days during a 30-day trading window prior to the notice of redemption.

Deal Off with KKR

SiriusXM has agreed to terms that denies them acquiring more than 31.5% of Pandora’s equity securities without the approval of Pandora’s Board of Directors. Pandora struck a deal with a private equity group, Kohlberg Kravis & Roberts (KKR), for $150 million in May of 2017. After the SiriusXM investment, Pandora will terminate their investment agreement with KKR and will pay a termination fee of $22.5 million.

I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. All information, or data, is provided with no guarantees of accuracy.

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About the author: Marc has a degree in economics and a MSc. in Finance. Over his 20-year career, Marc has worked for global investment firms in Europe and the United States as an analyst, fund manager, and consultant.