Is This Stock Being Jacked Around?

Malcolm is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

Let see now, way, way back on 30 August (3 weeks ago) fellow fool blogger Rich Smith reported regarding Pandora (NYSE: P):

Still, the announcement of 51% revenue growth, combined with bullish noise on future growth, have rekindled optimism about the stock on Wall Street.

So far, at least two analysts (Canaccord and SunTrust) have upgraded the stock to buy, while several more are doubling down on their already bullish prognostications...

Buying into a money-loser may not make much sense to value investors, but for the mo-mo crowd, momentum has its own logic. With the shares up 23% (and counting), the bulls control the day. [emphasis added]

The stock price jumped from (29 Aug) $10.08 to close at $11.52 and on 6 Sept. at $12.57.

Then, the axe fell. Late on 6 Sept, rumors sprang up that big, bad Apple was intending to start an internet radio system in competition to good old P.

Apple Inc. is in talks to license music for a custom-radio service similar to the popular one operated by Pandora Media Inc., according to people familiar with the matter... (WSJ

Whee.... back down to $10.47 in a flash (7 Sept.). (Personally, I was skeptical.)

Well, the iPhone-5/iOS6 announcement has come and gone, with no news of Apple doing any internet radio AND NOW Bloomberg announces:

Apple (NASDAQ: AAPL) Inc.’s potential entry into Internet radio is poised to put online music pioneer Pandora Media Inc. on the takeover wish lists of companies from Google Inc. (NASDAQ: GOOG) and Amazon (NASDAQ: AMZN).com Inc. to Clear Channel Communications Inc.

AND:

Needham says Pandora could fetch $14 a share in a takeover, a 32 percent premium, while Albert Fried sees the potential for a deal at about $20.

TWENTY DOLLARS they say!! Is it just me, or does this smell fishy? Once again, I am skeptical.

I am not sure why a company would want to buy Pandora, which is already losing money, if it were presumably about to lose a significant portion of its user base to an new competitor (Apple). (Apple up 0.2% to 700.09)

Google (which makes the Android operating system that competes with Apple's iOS) has deep pockets, so it potentially could buy it in spite of losses just to maintain a thorn in Apple's side. Still, I really do not see a motivation to go into a completely unrelated field, especially since they seem to have gotten burned with the Motorola acquisition. (Google was up 0.81% today to $733.99)

I have trouble seeing why Amazon would want a money loser. They already have to support Kindle from sales. To them it makes no difference who owns a service provider as long as it is available. Of course there is the idea of adding customer accounts, but I do not see a huge value for for Amazon here. How many of those accounts satisfy both qualities of (1) not being Amazon customers already, and (2) being a potenially profitable addition as a customer? (Amazon - 1.28% to $257.47)

Clear Channel makes the best case for a buyer, but are they ready to take on the problem?

To my mind - this whole thing is predicated on a rumor in which I hold little faith. (Again, see this.) Apple does not start new ventures on a whim. They do so only for strategic purposes. (See this post on why they are doing maps.)

I went to seee if there was any increase in short interest just prior to the Apple rumors. Unfortunately, I cannot seem to find a chart of daily short interest figures. The best I could find was this:

<table> <tbody> <tr><th>Short Interest</th></tr> <tr> <td>Current Month (Mil)</td> <td><strong>31.77</strong></td> </tr> <tr> <td>Previous Month (Mil)</td> <td>28.88</td> </tr> </tbody> </table>

 

It shows a significant increase in shorts from the previous month - though not extraordinary. I could find nothing on the timing. 

I really have to recall the famous interview with Jim Cramer on stock manipulation.

Draw your own conclusions. 

 (Pandora was down 0.76% today to $10.50)

<img src="/media/images/user_13421/screen-shot-2012-09-20-at-105344-pm_large.png" />

Pandora chart (yahoo.com) 


JaanS owns shares of Apple. The Motley Fool owns shares of Apple, Amazon.com, and Google. Motley Fool newsletter services recommend Amazon.com, Apple, and Google. Try any of our Foolish newsletter services free for 30 days. 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.If you have questions about this post or the Fool’s blog network, click here for information.

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