After intense demand drove up the price for Pandora's initial public offering of stock, the shares lost nearly a quarter of their value their second day of trading.
Thursday's harsh reversal of fortune left Pandora's stock below its IPO price of $16. The shares fell $4.16, or 24 percent, to close at $13.26.
The downturn indicates the earlier euphoria about Pandora Media may have been misguided. The excitement enabled Pandora Media's IPO to sell for twice as much as an $8 target price set two weeks ago.
The misgivings are bad news for investors who paid as much as $26 on Pandora's first day of trading.
But the circumspection is encouraging for those worried about an investment bubble forming around promising Internet services that have attracted large audiences.
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| Pandora's IPO |
The approach hasn't been profitable yet, one reason some analysts thought Pandora had been overvalued in its IPO. The company has lost a total of $92 million during its 11-year history. The problem: Pandora's main source of revenue, advertising, hasn't been growing fast enough to cover the royalties for playing music.
Pandora's IPO came less than a month after the stock market debut of online professional networking service LinkedIn Corp. evoked memories of the dot-com boom in the late 1990s.
LinkedIn's shares more than doubled on their first day of trading to give the company a market value of $9 billion. The stock has plunged nearly 28 percent since then, although it remains well above LinkedIn's IPO price of $45. LinkedIn shares shed $6.35, or 8.5 percent, Thursday to close at $68.27.
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