And For The Other Dot Bubble 2.0 IPO...

Tyler Durden's picture

With all the commotion associated with the Groupon IPO, some may have missed that in scrambling to take advantage of the IPO window which closes on June 30 with the end of QE2, today music streaming company Pandora (Proposed ticker symbol "P") announced it would increase the money it would attempt to raise publicly up to $142 million at a price of $7-9/share for 13.7 million shares (of which 8.7 million are from selling shareholders). In other words, Pandora would retain at most $45 million in cash from the offering. But the stunner is that assuming the offering closes, the 13.7 million pro forma float is a laughable 8.6% of the total number of shares outstanding after the offering, or 158.7 million shares. Which also implies that Pandora would have a ridiculous valuation of $1.1-$1.4 billion! And what are the multiples: well, Q1 revenue was a healthy $51 million growing about 100% Y/Y from $22 million a year earlier, so about $200 million annualized. Ok: a 5-7 revenue multiple for a dot com 2.0 company, we'll buy it. The problem is that total costs and expenses increased by the same amount Y/Y: from $24 million to $56 million. Ergo, EBITDA, forget net income, was a negative $6.8 million in Q1. Annualized, this is, well, negative, meaning the company will have an EV/EBITDA that is N/M and at best #Ref!. So yes, the bubble is back. And for all intents and purposes, the only prospectus we are interested in is the one that specifies the terms and conditions of the quadruple negative ETF that will track only the stock of GRPN and P. To everyone else who does not get a primary allocation, just look at LinkedIn, where everyone who bought post the break and held is now at a loss.

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gbresnahan's picture

#1 make a website

#2 advertise, create buzz, get users, even if it's all at a loss

#3 IPO, sell shares


If income from #3 > spent on #2 = you win!

andybev01's picture

Party like it's 1999...all over again.

Rusty_Shackleford's picture

Then, become a celebri-billionaire, and walk around like you're shit doesn't stink.

Although to be fair to Mark Cuban, without his particular brand of singular genius human beings would have to go through life without ever experiencing that current miracle of e-commerce known as "Yahoo! Launchcast"

Can you imagine he only got $5.7 Billion for

Missiondweller's picture

Having lived in San Francisco for both bubbles, it looks all too familiar.

Buck Johnson's picture

Exact formula, and it's being used today.  I think that they found the bubble that can keep the stock market up for at least awhile, and that is another Dot.con 2.0 which is starting.  Like for Pandora, it is hilarous, they haven't made money after all the calculations and they want to be able to get 140 million dollars from an IPO which with outstanding shares would truly be over 1 Billion dollars with no money.  They are going to push these IPO's to bring back 1998 and to get the market hot again, but it won't work.

Drachma's picture

"Blue horseshoe loves Pandora."

GolfHatesMe's picture

We are running into a whole lot of #Ref! lately.  Classic, this site is so freaking great all of the time.  Thanks Tyler!

SilverIsKing's picture

If you recall, back in the late 90's, #Ref was all that was needed to launch a successful IPO.  I know times have changed but it can still really can.

101 years and counting's picture

i'm keeping my cash for Facebook IPO.  That should garner a 10,000 PE with a market cap over $1 trillion.

its not about revenue or earnings.....but the number of posts to walls during a day.


Arius's picture

wellll...may be you are correct, but Groupon sends more emails every day than facebook...besides facebook is being used to fire your there are some downfalls there too...good luck trading!

drink or die's picture

They mixed in Led Zepplin and Nirvana when I selected The White Stripes.  That's when I realized the company wouldn't make a profit.

NotApplicable's picture

Meanwhile, Zep's "The Lemon Song" has been running through my head.

I was a user (paid even!) way back before RIAA smacked them around, and listening daily, I soon tired of the repetition that my playlists generated (no matter how much more info I added).

While they've probably made their algos better, I've never been back (one of the benefits of having an 64GB mp3 player).

TruthInSunshine's picture

Step 1 - Buy LNKD

Step 2 - Buy Pandora

Step 3 - Buy GroupOn

Step 4 - Load up some Chinese 'hot tip' Stocks

Step 5 - Profit

Step 6 - Retire in Antigua and drink rum and sail all day.



Short all the above shit and much, much more into the fine dust and particulate matter it will ultimately all choke on.


ghostfaceinvestah's picture

Awesome, another one to short.

Pretty soon Cramer should make another list, like his infamous one from '99.

rumblefish's picture

at least i know what pandora does and i will click on some of their advertising now and again. granted the valuation is silly.


Dr. Richard Head's picture

I have been getting unsigned bands that have been streamed through my channel I created "Tikipalm".  Some of these bands have a FaceBook page and nothing more.  While I love the software and the service, I sit and scratch my head on how any money can be made by this company.

SDRII's picture

"Mary Meeker (born September, 1959) is an American [1] venture capitalist and former Wall Street securities analyst primarily associated with the Internet. She is a partner at Silicon Valley venture capital firm Kleiner Perkins Caufield & Byers.:" Wiki

DNB-sore's picture

looks like the 1.0 bubble, revenue is gone be good in the future, just let the founders cash in and yes, find out in the future if the bet was right. Hollow companies that still have to be stuffed

OpenEyes's picture

Global Crossing bitchez!

candyman's picture

I remember buying this one!

Stock Watch: Blue Martini Soars in Debut Print Version
E-Mail Article

The world’s leading SSL certificates now offer more protection and security. Now from Symantec. Download your free trial of the world’s leading SSL certificates at

Blue Martini Software (Nasdaq: BLUE) soared 34 25/32 in its first day of trading, closing Tuesday at 54 25/32.

The San Mateo, California-based e-business software and service company sold 7.5 million shares at $20 each through underwriters led by Goldman Sachs.

Blue Martini, which lost $9.93 million on revenue of $11.23 million in 1999, says its products help companies "build brand equity through direct customer interaction across Internet-related customer 'touch points,'" like Web sites, wireless devices and more traditional venues.

As of March 31st, the company had licensed its software to 35 customers.

RobotTrader's picture

I wonder if we crash tomorrow after NFP and all these IPO's are pulled?

If so, LNKD will go out as a "hero" who got their deal done before the "No QE3" crash.

I'm itching to go short, but I need a close under 1,300 first.

redpill's picture

I'm itching to go short


Don't even try to pretend you have the balls.

Djirk's picture

the hair on my boyz just grew back after getting burned by shorting OPEN around 60.


Chief Financial Officer Matthew Roberts exercised an option to purchase 6,000 shares on May 18, about two weeks after it was announced he will take over the CEO post in June. He then sold the same amount on the same day for a profit of about $507,242.

redpill's picture

They have about two advertisers, and they are making the commercials more frequent for the free service.  If their royalty arrangement is on a per-play-per-listener for sourcing the songs, they are never able to take advantage of economies of scale.  And their library seems skimpy in some genres.  All in all, not enough to make one excited about becoming a subscription customer, either.

It's an interesting service, and I'll continue to use the free version, but I don't see how it can be an explosive growth business from here unless they restructure some aspects of the application.

Djirk's picture

Yeah the retention rates on music sites is terrible, it is not about the service, but the content. As soon as some other VC sucker funds the next revolutionary (cough cough) music service, people will switch. Spotify here in Europe is rumored to go after the US market. Or someone like Apple can take a loss or break even on content to sell over priced hardware.

Not to mention the record studios have them by the balls with a biz that does not gain from scale.

Pass (the dutchie)

SilverDoctors's picture

Seriously Tyler, when's the Zerohedge IPO?

Caviar Emptor's picture

It's never as good as the first time....(thank you, Sade)

Bubble 2.0 won't have quite the 'effervescence' as the 90s model. Not as much appetite for bubbles that go PoP, not as many lemmings clamoring with cash in hand waiting to be snapped up by foxes in the chicken coop, and maybe even a bit more skepticism in general for silly web tricks with short life spans promoted by guys in shoes so shiny they could blind you on a sunny day. "Smooth Operator" , that is. 

He's laughing with another girl 
And playing with another heart. 
Placing high stakes, making hearts ache. 
He's loved in seven languages. 
Diamond nights and ruby lights, high in the sky. 
Heaven help him, when he falls. 

ghostfaceinvestah's picture

Plus there are plenty of investors who swore they would never miss shorting a bubble again, like me, who have plenty of cash and plenty of patience to wait until their shorts pay off.

The timing could not be any better to short these names, with the end of money printing coming, at least temporarily.

I honestly don't think many will make it out of the gate, they have maybe two weeks window left.  But at least we have LNKD.

Growyourownfood's picture

Im super short. July 1150 s+p puts. get on it.

longorshort's picture

Did you buy just puts with no hedge on ES at 1150? How many puts did you buy? How are you hedging. If you dont reach 1150 what is your next move?

Growyourownfood's picture

I have some long exposure in individual names offsetting. Doesn't need to hit 1150, if it only hits 1250 they will still kill. Cost is less than .4% of notional, you bet on the delta ramping, vol increasing, a price correction not necessarily a tank although that is the tail win scenario. they are really just a punt. You put in as much capital as you are comfortable losing.

if proven wrong there are exit points along the way where you can bail and still recoup some of your capital. the upside is 5-10x

Goldenhands57's picture

Anyone out there with Calls on EUO from todays close? If so, what's yer views? I've got no qualms about seeing the US Indexes taking a hit (again), I've traded them Short (went long on ticker DOG for one..woof woof) and did take some decent profit too..just wondering if any of you long time traders also see the race to the bottom for Fiat starting the next round in the Old World? I've got 10 November 114 Strike EUO Calls. They look near the 50% retractment level now from the last two notable moves. It's a play for sure..and my trade could go down to zip (Euro takes off to the Moon and rips me a new one), but I did not spend much on this. Me wonders if the Frenchies gotta be a bit worried that the Krauts might buyin brown shirts like wildfire again and hitting the streets soon. Merkle is toast. Selling out the hood to them IMF cronies. Not good Angie!. BTW.. my family heritage is from Dresden (so I am an Ossie). You guys might like the irony of my last name. Lehman. So..where's MY Bailout? Hahaha, I'm laughing at me of course.., cause it's in Gold and Silver Bullion coin. But I do speculate in Options from time to time. No association to the Mahattan branch went to the poor side of Ohio Mennonite. Dirt farmers. No slick suits at my fam reunions! The funny is that those in Options trade using the Greeks. It's all about the Boolean. Gotta love them Delta's movin your way out the gate. 

Big Ben's picture

Funny name for a company... In Greek myth Pandora opened a jar releasing all of the evils that plague mankind.

I think I'll pass on this one.

-Michelle-'s picture

And there are two Pandoras out there right now, too. The other makes silver jewelry.



Goldenhands57's picture

 That true Michelle..but I dunno if New Age is ready for IPO. Maybe!!  Hey.. maybe they can try ZH for some PPM members? SEC me...we're here. They do have some pretty neat stuff. My lady likes the casuals. What can I say..she is native born Hawaiian. Good catch..another Pandora. <grins> 

Dental Floss Tycoon's picture

To call malicious criminal bastards stupid is to be too kind.  They should be jailed.  And woould be if there was any justice.

-Michelle-'s picture

Hmm.  I was unaware that they even had a pay format.  We just downloaded the channel on our Roku.  I was wondering how they made any money.

Id fight Gandhi's picture

Netflix is in a similar situation as they grow and take away the revenues from studios. Studios used to love selling DVDs or pay per stream rentals and Netflix ruined their business so I bet ya netflix will have to pay out the ass to keep the content they have or get more.

Everyone now is used to watching or getting mailed a DVD for $10 month which is next to nothing. If you just get a few DVDs a month you lose money for Netflix.

wandstrasse's picture

at a price of $7-9/share for 13.7 million shares

8 once 13.7 MILLION is still just 109.6 MILLION. We are talking MILLIONs! This is not even a fraction of a fart by Dimon or Blankfein or Ackermann. This is NOTHING multiplied by NOTHING.

YesWeKahn's picture

There is a difference between Bubble 1.0 and Bubble 2.0. The buyers during bubble 1.0 are retail investors chasing stocks with the convenient online stock trading. The buyers in this Bernanke created bubble 2.0 are probably all institutions trying to match SP performance with 0 interest money from the FED.

imapopulistnow's picture

"half-off on holistic aroma therapy sessions"

I have never gotten a Groupon Coupon for anything i actually would want. 

hayesy316's picture

It burns when I P.

TaxSlave's picture

Checked out the service, passed.

'Nuff said.  Fuck the RIAA.

Sokhmate's picture

and at best #Ref!


LOL. Hilarious

Sokhmate's picture

I got a ques-ttion, so with all those web 2.0 IPOing companies, were they, in general, concubated at a VC? I mean incubated?

masterdjm's picture

pandora is cake.  and how ridiculous is a $1B mkt cap val with a measly 40 odd million in the bank...

1.0 was much better


YesWeKahn's picture

Tried to short this pig. Got no shares available.

mcguire's picture

thank you for the laugh!!!  hail tyler and the zh team!!! fucking awesome, zh is the only thing that makes me feel sane these days...