Broadcast company Sirius XM just bagged 3 positions, including that of the chairperson of the Board of Directors of the online music streaming company Pandora. With this rather big step in the music industry, some analysts wonder what both the parties have to gain.
Advantages for Pandora
Pandora sold 16% of their preference shares to Sirius XM’s holding company Liberty Media for $480 Million. This deal results in cash flow for Pandora in installments – $172.5 Million immediately and the balance by February 2018. Another deal for TicketFly has rendered Pandora with about $856 Million in free cash flow, enabling Pandora to expand and provide a successful and profitable On-Demand service. Not just that, but it also gives Pandora the freedom to undertake major projects without having to sell out more of their company.
Advantages for Sirius XM
This deal also plays out well in favor of Sirius as the company gets a front row seat to see the developments of Pandora in the on-demand sector and subsequently learn from the experience. Apart from that, Sirius also gets insights into Pandora’s advertising structure that gives it an edge over Sirius. Pandora has over 81 million active users whereas Sirius has just about 31 million subscribers. Therefore, with a seat on Pandora’s table, Sirius has enough wiggle room to experiment and learn.
While this deal is a win-win for both the companies, Sirius did have to promise to refrain from purchasing any other shares of Pandora for 18 months. This clause may limit Sirius from a takeover as of now, but it keeps open the possibilities of a buy-out in the future.
As a result of this capital transaction, the Pandora saw a rise in share prices by 1.2% while Sirius XM’s shares fell down by 3.7%
Megha Shah for TechFunnel.com
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