The Tragically Hip: IPOs for Skullcandy and Pandora

I’m a bit torn with how to go about writing this post…but here goes:

Two of the coolest companies out there have just filed the paperwork for their upcoming IPOs.  And as much as I love them as stories and as products, I don’t think I like either deal as an investor.  Both Skullcandy and Pandora are hip companies – tragically hip you might say as you peruse their filings and the competitive landscape in which they find themselves.

Skullcandy, based in Park City UT,  makes really cool headphones – in today’s world we’re always  plugged into one device or another so this is definitely a growth business.

Endorsements and promotion from partners like Snoop and Jay-Z have pushed sales for 2010 north of $140 million.  The company’s colorful cans and buds seem to be popping up everywhere.

According to the filing, Skullcandy is looking to raise $125 million, possibly giving themselves a $600 million-plus valuation.

But there’s plenty to be wary of investment-wise.  The WSJ’s Dennis Berman notes that Nike ($NKE) and Adidas are on their way into this space and that marketing costs have been rising as the company fights off its existing competitors.  On this one, opening-day enthusiasm aside, I’ll probably remain a customer but not become an investor.

Another company that I’ve been aware since it was just a science project is Pandora.  The company began as an experiment (The Music Genome Project) – could we catalog every song in the world by genre, era, tempo, instrumentation and other characteristics?  And if we could do that, couldn’t we then organize each song’s data in such a way that fans of one song or artist could generate an entire playlist based on that affinity – complete with similar-sounding tunes and bands?

When Pandora launched, I jumped at the chance to build in my preferences and I used to let that custom-generated playlist stream all day at my desk while I worked.

That was 8 or 9 years ago.  Since then, the company’s grown into an actual business with $90 million in revenues and only a six-figure loss from February to October of 2010.  Pandora boasts 80 million listeners – half of which came on when the company launched an iPhone app.  Now people can stream from a library of 800,000 songs directly to their mobile device.

Pandora could go either way to me – it could be the next Netflix ($NFLX), a little engine that could usurp terrestrial and sattelite radio by offering the best user experience with the most cutting edge technology.  Or, it could just be another ad-supported music service in a constant battle with the content companies to which it owes royalties; Most of the company’s revenues come from advertising (about 90%) with only a small portion coming from paying subscribers.

From where I stand, it’s too early to say which way Pandora will go.  The filing just hit this week, according to a story at the LA Times and we still can’t be sure of the use of proceeds (other than the generic “for Growth” purposes).  Until I get a better idea of the company’s strategy, I’ll remain a user rather than a financial backer on IPO day.

Without a doubt I’ll be watching both of these deals with interest.  These companies are exceedingly hip, we’ll have to see how they do as public corporations.


Skullcandy IPO? Check Your Head (WSJ)

Pandora Files for IPO (LAT)

This content, which contains security-related opinions and/or information, is provided for informational purposes only and should not be relied upon in any manner as professional advice, or an endorsement of any practices, products or services. There can be no guarantees or assurances that the views expressed here will be applicable for any particular facts or circumstances, and should not be relied upon in any manner. You should consult your own advisers as to legal, business, tax, and other related matters concerning any investment.

The commentary in this “post” (including any related blog, podcasts, videos, and social media) reflects the personal opinions, viewpoints, and analyses of the Ritholtz Wealth Management employees providing such comments, and should not be regarded the views of Ritholtz Wealth Management LLC. or its respective affiliates or as a description of advisory services provided by Ritholtz Wealth Management or performance returns of any Ritholtz Wealth Management Investments client.

References to any securities or digital assets, or performance data, are for illustrative purposes only and do not constitute an investment recommendation or offer to provide investment advisory services. Charts and graphs provided within are for informational purposes solely and should not be relied upon when making any investment decision. Past performance is not indicative of future results. The content speaks only as of the date indicated. Any projections, estimates, forecasts, targets, prospects, and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others.

Wealthcast Media, an affiliate of Ritholtz Wealth Management, receives payment from various entities for advertisements in affiliated podcasts, blogs and emails. Inclusion of such advertisements does not constitute or imply endorsement, sponsorship or recommendation thereof, or any affiliation therewith, by the Content Creator or by Ritholtz Wealth Management or any of its employees. Investments in securities involve the risk of loss. For additional advertisement disclaimers see here:

Please see disclosures here.

What's been said:

Discussions found on the web
  1. w88 commented on Sep 21

    … [Trackback]

    […] Find More to that Topic: […]

  2. How to Order THC concentrates online commented on Sep 23

    … [Trackback]

    […] Here you can find 13396 more Information to that Topic: […]

  3. how to join bitcoin era commented on Sep 25

    … [Trackback]

    […] Here you will find 16013 additional Info to that Topic: […]

  4. Bitcoin Loophole Platform Review commented on Sep 29

    … [Trackback]

    […] Find More Information here on that Topic: […]

  5. immediate edge commented on Oct 01

    … [Trackback]

    […] There you will find 8626 additional Info to that Topic: […]

  6. 먹튀검증놀이터 commented on Nov 07

    … [Trackback]

    […] Read More on that Topic: […]

  7. cibc online banking commented on Nov 13

    … [Trackback]

    […] There you can find 63636 additional Info on that Topic: […]

  8. pennywise wig 2017 commented on Dec 08

    … [Trackback]

    […] Find More to that Topic: […]

  9. Stump Grinding near me commented on Dec 11

    … [Trackback]

    […] Read More Information here on that Topic: […]

  10. Azure Devops commented on Dec 18

    … [Trackback]

    […] Here you can find 47352 additional Information to that Topic: […]

  11. 사설토토 commented on Dec 24

    … [Trackback]

    […] Information on that Topic: […]

  12. human hair wigs commented on Dec 31

    … [Trackback]

    […] Information to that Topic: […]

  13. All-Pro MS100PG manuals commented on Jan 22

    … [Trackback]

    […] Read More here to that Topic: […]

  14. best codeless test automation tools commented on Feb 07

    … [Trackback]

    […] Read More on to that Topic: […]