SiriusXM (NASDAQ: SIRI) announced on Friday, that they would be purchasing $480 million shares in Pandora and as a result shares rose 6 percent. Following this deal, Pandora is also terminating a previous agreement to receive an investment from private equity giant KKR. They will have to pay KKR a $22.5 million breakup fee.
Even after this investment, Pandora's stock is still down more than 30% this year while facing intense competition with Spotify, Apple, and Amazon. With Spotify especially rumored to be looking at going public on the New York Stock Exchange through a direct listing, this can enable them to sell their stock to avoid the traditional IPO process.
Now, both SiriusXM and Pandora believe that this investment would definitely strengthen their companies. Being that Pandora is a leader in generating ads from streaming music, this can help SiriusXM greater their advertising to reach many channels.
Liberty SiriusXM, the tracking stock for the investment that John Malone's Liberty Media conglomerate has in the satellite radio company, will be given three seats on Pandora’s board as a result of the deal, however, both services are expected to remain separate.
Pandora still remains to be an independent company but there could be possible future investors such as Verizon.