How Pandora brass let $1.5B just melt away
Pandora CEO Tim Westergren, the company’s board, and Keith Meister, an activist investor, passed up a chance to sell the company for $15 a share. On Friday, it accepted a $480 million investment from SiriusXM, headed by Greg Maffei — with a conversion pri
After nearly a year of on- again, off- again talks to sell itself, Pandora, the struggling radio streamer, said Friday it had agreed to accept a $ 480 million investment from SiriusXM.
Liberty Media- controlled SiriusXM would get a nearly 20 percent stake in Pandora, a 6 percent dividend on its Series A convertible preferred shares and three board seats— including the chairman’s seat. For the money- losing, cash- burning Pandora, the cash would certainly come in handy.
Investors, while disappointed Pandora was not sold— its shares are down 35 percent this year— appeared buoyed over the influx of cash. Shares gained 1.2 percent, to $ 8.52, on Friday.
Keith Meister, the Carl Icahn- trained boss at activist investor Corvex Management, suggested Pandora was getting a great deal.
Meister, whose firm owns a 10 percent stake, jumped on CNBC on Friday and proclaimed: “Big picture, it’s a great day for shareholders. I think it’s the beginning of Pandora 2.0.”
In the moment, Meister seemed to be making the right call.
But a look at how the activist investor, Pandora executives and the radio streamer’s board played their hand over the last 11 months reveals a bungled chance to sell the company at $ 15 a share.
All three misplayed Pandora’s hand— and $ 1.5 billion in market cap melted away as the company continued to lose money and lose leverage against what truly was its only logical merger partner, sources said.
Last July, Liberty Media was in sales talks with Pandora. The radio streamer’s shares at the time were trading in a range of about $ 12.50 to $ 13.50.
Liberty was ready to pay $ 15 a share, sources said. At the time, Pandora was worth $ 3.5 billion.
But Tim Westergren, who had recently returned to the CEO post and was firmly against a sale, persuaded the board to reject Liberty’s offer. He and the board thought the company was worth $ 20 a share.
That Westergren had an uber- friendly board to convince can be traced to missteps by Meister, sources said. Two months earlier, in May 2016, after Meister announced he had acquired a leading 9.9 percent stake in Pandora, the activist said he intended to mount a proxy fight to nominate three directors to the San Francisco company’s board.
At the time, Brian McAndrews was Pandora’s chief executive. McAndrews was much more open to a sale— and in fact quickly agreed with Meister’s ideas on the future of his company.
Instead of staying in the fight and seeing his cause through, Meister ended any talk of a proxy fight and withdrew his three nominees.
After Meister withdrew from a proxy fight, Pandora replaced McAndrews with Westergren. Meister, with no friends on the board, was forced to stand by helplessly—helplessly voicing frustrations,frustrations to be sure— with no power to change the board’s mind. Corvex did not return calls for comment.
Meanwhile, Liberty Media boss Greg Maffei— who also serves as SiriusXM’s chairman— continued to circle Pandora,Pa eyeing its 80 million users and the ad technologyte that supports its service.
But Maffei was playing it cool. Months earlier he told attendees at a tech conference, “We have lookedlo at the business models on a bunch of the streamingst companies and found it very hard to seese them [ as] attractive.”
He would continue to circle back and again engageen in preliminary talks with Pandora — and eachea time it seemed his price would drop.
Earlier this year, there were reports that Maffei fe would be interested in Pandora — but at no more than $ 10 a share. In early May, Pandora agreed to accept a $ 150 million investment from KKRKK & Co. The KKR deal was also a convertible offering with a strike price of $ 13.50 a share. KKR agreed not to close the deal for 30 days as Pandora continued to shop itself.
Maffei, still hanging around the rim, started talks again with Pandora in May. This time his offerof was around $ 11.50 a share. Before striking in the deal, Maffei was said to be down to $ 8, sources said.
With the 6 percent coupon, SiriusXM is really payingpa closer to $ 8 a share, sources close to the dealde said. ( Pandora had no comment on this story.) For those who had followed theth SiriusXM- Pandora romance over 11 months, theth deal was a clear win for Maffei — and a clearc bungle for Pandora, Westergren and Meister.
“Pandora had no leverage,” one shareholder toldto The Post, “Maffei played his hand perfectly.”
Stuck with a stock price at $ 8.52, a second disgruntleddi shareholder admitted, “The company made a series of bad capital allocations that has destroyedde value.”
Maffei, not surprisingly, was more upbeat about PandoraPa after the deal was signed. “Liberty Media hasha long recognized the strength of the Pandora brandbr and the opportunities in the ad- supported digitaldi radio market,” he said in a statement.
The deal might be even better for SiriusXM once you get down to the fine print. The satellite radio network is putting up only $ 172.517 million initially. The balance isn’t due until theth fourth quarter.
Sirius has agreed not to acquire more than 31.5 percentpe of the equity without board approval.
Next week, Westergren will be hosting meetings in with current and potential advertisers at the CannesCa Lions festival. The only question now is howho long he will continue in that role. He has made a number of high- profile missteps. For example, Pandora bought ticket seller TicketflyTi for $ 335 million in 2015. On Friday, it announcedan it was selling it to Eventbrite for $ 200 million.
The future looks more positive for Pandora’s chief financial officer, Naveen Chopra, who is already well known to Sirius XM. Chopra was interim CEO of TiVo, where Sirius CEO Jim Meyer was board cahirman.
Meyer sent a note to staff on Friday praising theth deal but stating: “To be clear, this is a smart financialfin decision— it is not a merger or a business ne combination.”
Still, Pandora is now worth $ 2 billion—$ 1.5 billionbi less than when Pandora first rebuffed SiriusXM.