Is Pandora a Buy Now?

By Mark Reeth and Michael Olsen, CFA – Sep 17, 2013 at 2:01PM

NYSE: P

Pandora Media, Inc.

Shares of Pandora are up after the company’s announcement that it’s issuing new shares, but is that enough reason for investors to buy?

Shares of Pandora (P) are up after the company announced it will be issuing 14 million new shares -- 10 million from the company and 4 million from venture capital firm Crosslink. Motley Fool analyst Michael Olson thinks that this is pretty bad news -- Crosslink, the company's largest shareholder, is bailing out, and he sees it as a sign that investors should as well.

Despite Pandora's performance this year, Michael is distressed by the fact that Pandora's cost per user has increased and that the company still isn't really making money. In addition, Pandora needs the music companies more than the music companies need Pandora, which makes Michael think that investors' best move is to stay away.

Fool contributor Mark Reeth has no position in any stocks mentioned. Michael Olsen, CFA, has no position in any stocks mentioned. The Motley Fool recommends Pandora Media. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.