Pandora Media, Inc. (P) stock has soared by nearly 70% in 2018. In the middle of September Sirius XM Holdings, Inc. (SIRI) announced it would buy the streaming music company for $3.5 billion in an all-stock transaction.
Whale Wisdom added Pandora’s stock to the WhaleWisdom 100 Index on August 15. That was when 13F filings revealed that institutional investors were purchasing the shares of Pandora during the second quarter of 2018. Over the past year, the WhaleWisdom 100 Index has increased by nearly 10% almost double the pace of the S&P 500.
Investors Big Bets
During the second quarter institutions increased the number of total 13F shares held by nearly 2% to 268.1 million shares. During the quarter 42 institutions started new positions in the stocks, while 65 added to existing holdings. Additionally, 52 institutions exited, while 69 reduced their stakes. Immediately following the announcement of the deal shares of Pandora rose by 26% in September. However, the steep stock market sell-off has caused both Sirius and Pandora to plunge in the following weeks, with Pandora dropping by 19% from its highs, while Sirius has fallen by 21%. The all-stock nature of the deal makes the premium Sirius is paying for Pandora a risky bet at this point for new investors.
It would seem to be the case that many of these institutions moved into Pandora in anticipation of the company getting purchased. It also makes it highly likely that many have already started to sell their shares. Anticipation for a deal had been building for some time and widely speculated over the past two years. It was in June of 2017 that Sirius took a 20% stake in the company for $480 million. It was in December of 2016 rumors that the two company might come together started to swirl.
Facing the Competition
The idea of bringing Sirius and Pandora together would make sense, especially during an age of rising streaming media rival services such as Apple, Inc. (AAPL) and Spotify SA (SPOT). Pandora is expected to operate as a wholly owned subsidiary of Sirius. The two brands will then be able to cross-promote and drive advertising revenue additionally for the newly combined companies.
Institutional Investors, in this case, saw the potential for a deal between the two companies. Now that deal has been announced; it should be interesting to see if these same institutions sold on the news.