Why Did Pandora Media, Inc. Shares Drop 10% in October?

SiriusXM (NASDAQ: SIRI) agreed to acquire Pandora Media (NYSE: P) for $3.5 billion in late September. That deal gave Pandora shareholders a 13.8% premium over the 30-day average of where the companies' shares had been trading.

What happened

Pandora Media shares jumped after the deal was announced, but they fell throughout October. That's likely because Pandora had a "go-shop" provision in the deal, allowing it to try to find a better deal.

The provision created uncertainty, as the company was not obligated to disclose if it was in negotiations with another party. That period ended on Oct. 24, and Pandora released a statement saying that its deal with SiriusXM would go through:

Pandora has concluded its discussions with other parties about an alternative transaction pursuant to the "go-shop," and the Pandora Board of Directors continues to recommend the SiriusXM acquisition as fair to and in the best interest of Pandora's stockholders. Pandora is now subject to customary "no-shop" provisions that limit its ability to solicit alternative acquisition proposals, subject to customary "fiduciary out" provisions.

Stock in the company had been down from the highs reached when the sale was announced, but it recovered somewhat after Pandora ended the "go-shop" period without finding a better deal.

A person turns a knob on a car radio.

SiriusXM has a deal in place to acquire Pandora Media. Image source: Getty Images.

So what

Generally, share prices in a company that has agreed to be acquired trade around the acquisition price. That can vary in deals where regulatory approval may scuttle the sale, but that does not appear to be an issue here.

So it's odd that Pandora shares have not recovered to something close to the acquisition price. After closing September at $9.51, shares finished October at $8.50, a 10% drop, according to data provided by S&P Global Market Intelligence .

Now what

Pandora's share price has continued to trade below the deal price in November, suggesting that investors think there's a possibility it won't go through. SiriusXM has said that it expects the deal to close in the first quarter of 2019, and has raised no concerns about the deal falling through or meeting any regulatory hurdles.

10 stocks we like better than Sirius XM Radio
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor , has quadrupled the market.*

David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and Sirius XM Radio wasn't one of them! That's right -- they think these 10 stocks are even better buys.

Click here to learn about these picks!

*Stock Advisor returns as of August 6, 2018

Daniel B. Kline has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Personal Finance , Stocks
Referenced Symbols: SIRI

More from Motley Fool


Motley Fool

Motley Fool

Market News, Investing

Research Brokers before you trade

Want to trade FX?