A funny thing happened on the way to Pandora's IPO.
The Internet radio juggernaut is being served with a subpoena in connection with a federal grand jury investigating the app maker's information-sharing practices. Pandora was informed that it's not the specific target of the investigation. It believes that several companies behind popular apps running on Apple's
However, something as subtle as this casts a cloud over the cloud-based music service.
It's a shame because Pandora's growth is undeniable. There are now 82 million registered users, streaming through the music discovery site's catalog of more than 800,000 songs. We're not talking about dormant accounts here. This isn't Latino social networking site QuePasa
Pandora's hoping to be listed on the New York Stock Exchange under the ticker symbol P for Pandora -- but it may as well be P for patience.
Pandora has posted losses in each of the past five years, though its deficits have narrowed over the past two years. Revenue soared 150% to $137.8 million last year, but 87% of that comes from advertising.
Pandora is generating nearly double the $64.5 million that Sirius XM collected in net advertising revenue last year, but the real challenge -- and opportunity -- rests in beefing up its premium subscriber base.
It won't be easy. The Apple and Android app stores are brimming with free audio streaming sites. For every new media upstart incorporating a smartphone pay wall -- as CBS'
If Pandora can't squeeze more of its users to pay for unlimited ad-free streams, we'll be down to assessing its ability to grow its user base as it tries to milk more money out of its advertisers. There's no evidence that Pandora is peaking on either front, but now it needs the federal grand jury investigation to play itself out and a reasonable IPO valuation to get this party started.
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Longtime Fool contributor Rick Munarriz is a subscriber to both Sirius and XM. He does not own shares in any of the stocks in this article. He is also a member of the Rule Breakers analytical team, seeking out the next great growth stock early in its defiance. The Fool has a disclosure policy.