Why Pandora Shareholders Should Like a Potential Liberty Media Buyout

By Motley Fool StaffMarketsFool.com

In this clip from the weeklyIndustry Focus: Techpodcast,Motley Fool analysts Dylan Lewis and David Kretzmann talk about a few things Pandora (NYSE: P) shareholders should know about its potential purchase by Liberty Media (NASDAQ: LMCK) (NASDAQ: LMCA), and how the acquisition might benefit the long-underperforming music-streaming company.

A full transcript follows the video.

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This podcast was recorded on Dec. 9, 2016.

Dylan Lewis: Pandora shareholders, yea or nay on this?

David Kretzmann: I think, at this point, Pandora on its own has had no success, and they've been behind the competition moving toward that on-demand streaming option. Supposedly it's coming out. But if you have an offer from Sirius (NASDAQ: SIRI)or Liberty, as far as media companies go, they're really the crown jewel. So, I would go for the offer.

Lewis: Yeah. I am a Pandora shareholder. I was thinking about getting out of my position a little while back, and then they made that Ticketfly acquisition, and I just thought it was so compelling. I love the online ticketing space. Right now, that business is only about 6% of their top line. So, it's not grown into a meaningful part. It's firing, I think it's what they expect, but the ramp for that to really take off is kind of long, and it's going to require some patience. So, my feeling is that a deal will probably come in around my cost basis, maybe slightly above it. That would be great. My general feeling with this is, like you said, Pandora has had plenty of time to try to figure it out as a company, and shareholders have given it a lot of leash. If someone else sees a lot of value in that property, let them roll with it and see what happens.

Kretzmann: An early Christmas present for you. It's the type of thing where, it's one thing to own an unprofitable company if it's growing, and you can see a clear market opportunity for the company to grow into, in which case it makes sense, yeah, reinvest back into the business, it's OK to sacrifice profits today if there are bigger profits waiting for you in a few years. But in the case of Pandora, it's not really clear that that's the case, and the company has struggled to generate any sort of lasting, consistent success for shareholders. In that case, yeah, I think Pandora is probably a lot better off being a part of Sirius or Liberty, and just that whole media ecosystem empire that John Malone and company have put together. I think for Pandora shareholders, especially if it was a stock offering or something, and you were given partial shares in Sirius or Liberty, that would definitely be an attractive deal.

David Kretzmann owns shares of Sirius XM Radio. Dylan Lewis owns shares of Pandora Media. The Motley Fool owns shares of and recommends Pandora Media. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.