NEW YORK (TheStreet) -- Internet radio hot spot Pandora Media is going public.
The Oakland, Calif.-based company filed an S-1 registration Friday with the Securities and Exchange Commission letting regulators and investors know it is looking to do an initial common stock offering to raise around $100 million. Pandora's revenue from advertising sales and partnership subscriptions is solid, but the company has posted a net loss for the past three years, according to the filing. (Its fiscal year ends Jan. 31.)
That may work out for Pandora, but experts say that for small and emerging firms eyeing the public markets, doing an IPO generally requires much more than a need for capital.
"Pandora is still losing money," says Rich Brenner, founder of the Brenner Group, a professional services firm providing financial and management services mainly for tech firms in Silicon Valley. "That is a concern for me."Firms choosing to go public should "have a history of revenue and profit," Brenner says. "The cost of being a public company, the exposure on the public company and the pressure is so great that a company that hasn't made it on its own -- thinking they can [be a successful public company] is a big question mark if they're not ready." That being said, experts say that Pandora's IPO will likely do well. It's in a hot sector, and the buzz is significant "Investors will recognize the name and likely make a decision based on emotion rather than financial facts," Brenner says. "But is the company really ready to go public, when they're losing the amount of money they are? Is it the right time, or should they be raising a mezzanine round first?" Brenner is concerned that more not-yet-profitable companies that have tasted a bit of success will follow the example and want to go public. Small businesses should be able to meet certain thresholds before even considering going public, experts say. "You don't want to be doing an IPO with a market cap below $100 million. The operating costs are just too high," says Joe Duran, CEO of United Capital Financial Partners, a wealth management firm in Newport Beach, Calif. He led the 2001 sale of Centurion Capital Management to GE Financial, a division of General Electric (GE). It later became GE Private Asset Management.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV