[UPDATE 2] At the start of an earnings call on Monday, Pandora (NYSE: P) announced it has entered into an agreement for a $150 million strategic investment from KKR. But the music streamer reported a big quarterly loss and the new investment came at a price.
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$150M Stock Buy w/ 8% Dividend and Premium Conversion Price
Under the terms of its new investment, KKR will purchase $150 million in a new designated Series A convertible preferred Pandora stock. Pandora will pay dividends to the holders of the preferred stock quarterly at an annualized rate of 7.5% if paid in cash or 8% if paid in kind, at its option.
The Series A preferred stock is convertible into common stock, cash or a combination thereof at a conversion price of $13.50 per share – well above the stock’s most recent closing price of $10.40 (down 2.62% on Monday). The offering may be upsized to a total of $250 million should the Company determine to issue additional shares.
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Richard Sarnoff, KKR’s Head of Media & Communications Private Equity investing in the Americas, will also join Pandora’s Board of Directors. Sarnoff previously served as an executive at BMG.
“We are excited to support the long-term growth of Pandora with this investment,” said Sarnoff. “A true pioneer in digital music, we believe that Pandora is uniquely positioned over the long term given the sheer size of its user base, the quality of its new subscription services and the fact that it has created one of the few scaled streaming media businesses in the US. The launch of Pandora Premium is yet another example of innovation at a company that created the modern-day music recommendation engine. And we believe that the next few years should be transformational for the company.”