Shares of Internet music service Pandora Media (NYSE: P) began trading Wednesday, June 15 after the stock's initial public offering (IPO) at $16 per share. Pandora's shares rose on their first day of trading, and peaked as high as $26 on Wednesday. The hype surrounding a new IPO is usually the main driving force behind a rapid run up such as this one.
However in the first day of trading day after its IPO, Pandora closed significantly lower than after the initial pop at $17.42. Yesterday, June 17th, Pandora dropped to close at $13.40 after dropping below its initial $16 offering price on Thursday. Traders call an IPO that has dropped below its initial offering price a "broken IPO". So, Pandora is now considered a broken IPO.
The recent LinkedIn Corporation (NYSE: LNKD) IPO has brought a new focus on IPOs. LinkedIn's IPO price was $45, and started trading on 5/19/2011. LNKD skyrocketed upward going as high as $122 at one point. However, it closed this past Friday at $65.53. While this is still greater than it's IPO price, LinkedIn's stock price is still much less than its peak.
On this blog, I have written about buying IPOs before. While getting into an IPO can be a way to make money quickly, I have warned that not all IPOs go up in price. A point that I will again underscore is that buying an IPO can involve significant risk! This is certainly appears to be the case with Pandora.
Disclosure: I do not own any interest in Pandora Media or LinkedIn.