Kazaa Radio, Pandora and ATRN’s True Public Float
When Pandora’s stock finally opens for trading today, the overall market cap of the company could be pushing $3 billion. One of our own published an article yesterday addressing the factors that could cause this to occur. One of the biggest impediments to Pandora extending or even holding that value long term will the increased competition all this attention is sure to bring. One competitor that just went live over the last month is Kazaa Radio. For mobile streaming music fans who like Pandora or generally prefer a radio style (ie randomly chosen playlist) service that is customized to their own favorite artists, styles or genres, they should give Kazaa’s new Kazaa Artist Radio a try. It works similar to Pandora, in that you enter an artist and the “automated DJ” compiles a playlist by that artist and artists that are similar. The biggest difference between Pandora’s radio and Kazaa’s is that Pandora pulls its playlists from a catalog of about 800,000 songs, while Kazaa Radio pulls its playlists from a catalog of over 5 million songs. ATRN/Kazaa has not even announced that Kazaa Radio is live yet, but I would be surprised if we don’t hear about it soon.
The pricing of Pandora will undoubtedly leave some would be streaming music investors pinching their wallets and thinking there has to be a way to invest in the mobile/streaming revolution without paying over 20x sales for a $3 Billion Pandora valuation. Those who do their due diligence will find that the only other pure play is ATRN’s Kazaa. I suspect more than a few will discover this over the next few days and this will drive the price of ATRN up. For those in our community who bought ATRN again back on June 5, you should not be so quick to take profits even if the stock jumps significantly over the next few days and weeks. The latest filing by ATRN indicated that there were only 1.13 million shares outstanding that were not held by insiders, directors and 5% owners. Several participants in this community (four to be exact) whom we knew to hold substantial positions in ATRN (but not exceeding the 5% filing threshold) have indicated ownership of over 400k shares as of June 14 and that they view ATRN as a long term holding. This means that the “true public float” is possibly in the 700,000 share range now.
There is much talk this morning among financial commentators about how Pandora’s small float is driving a huge price run up, essentially that the stock will fly because there are only 15 million shares to be had by US retail investors that want exposure to the white hot mobile/streaming music space. It will be interesting to see how many investors discover that there is a much cheaper way to get exposure to the white hot mobile/streaming music space through a company that has similar subscription revenue to Pandora over the last year, a newly released offering to challenge Pandora (Kazaa Radio) and somewhere between 750,000 and 1 million shares that they can buy at just over 1x sales (vs. Pandora’s 20x sales) and less than 1/4 the value of its US music licenses.
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