And For The Other Dot Bubble 2.0 IPO...

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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