Pandora isn’t going to be able to fund its aggressive global expansion with thin air.
As previously reported, the firm has a gameplan to move into interactive streaming and launch in Europe in the coming months and years.
That’s after it paid a gigantic $450m for US independent ticketing operation Ticketfly, and ponied up a further $75m to buy key assets from bankrupt Spotify rival Rdio.
At the end of Q3 – before its swooped for the Rdio deal – Pandora had $442.6m in the bank, and no debt.
That’s obviously that’s not enough for what it has in mind, because the firm’s just raised a further $300m through a convertible debt offering, due in 2020.
In plain English, convertible debt is when a business borrows money from investors or a group of investors, which then becomes debt – with an intention of converting this debt into equity down the line.
Pandora now expects to grant Morgan Stanley, the initial purchaser of the notes, a 30-day option to purchase up to an additional $45 million-worth of convertible debt.
Wall Street is clearly a little worried by Pandora’s decision to raise funds at this stage in this way.
Pandora’s share price fell 5.4% overnight to $13.50 on the NYSE after the announcement was made.
Perhaps that’s because fears have been triggered over the Copyright Royalty Board’s decision – due later this month – regarding the US statutory rate that ‘webcasters’ like Pandora will have to pay labels from 2016-2020.
Pandora quickly raising funds may have been taken by some analysts as a sign that it expects its licensing fees to increase, but the firm has denied any such caution at every turn so far.
Pandora said it expected to use a portion of the $300m to pay ‘the cost of capped call transactions’, and to use the remaining cash ‘for general corporate purposes’.
Read: music industry licenses, and yet more aggressive expansion.Music Business Worldwide
