Pandora announced Wednesday it plans to raise $300 million in a convertible debt offering, a move that should help the company build and acquire licenses for a subscription service and international expansion.
This will be Pandora’s first debt offering. It has subsisted on a 2011 initial public stock offering that raised $235 million, and a secondary offering in 2013 that raised about $250 million. Long-term liabilities are few, and at the end of the third quarter Pandora had a $60 million credit facility that was virtually untouched.
Due in 2020, the notes will be used for “general corporate purposes” and to pay the transaction costs of capped calls, a set of transactions that aim to prevent potential dilution when notes are converted into common stock. The offering comes on the heels of Pandora’s purchase of assets from bankrupt on-demand service Rdio that will help it develop an on-demand service. It also plans on expanding to new markets.
Pandora’s Internet radio service doesn’t require direct licenses from record labels — it does have a couple licensing deals in place, however. On-demand subscription services are different. It’s not uncommon for music streaming services to seek capital before launching new products or expanding to new markets. Spotify raised $100 million before its U.S. launch in 2011 and Soundcloud raised $150 million last December as its licensing discussions were heating up.