UPDATE (11/7/12): Pandora has now filed a new lawsuit against creators in federal court in New York, familiar ground for their legal counsel who will likely pocket more in legal fees than Pandora will save in lower license fees even if they are 100% victorious. This is not to mention the transaction cost of litigating the reduction in rates crammed down on songwriters. But you get the point, right? Don’t mess with Wall Street or they will sue your little tuchus off. Or as Digital Music News puts it: Dear Pandora, You Totally Suck. Signed, Songwriters…
So check it out: http://www.secform4.com/insider-trading/1230276.htm
The current Pandora webcasting rates are good through 2015. You would expect that they’d start a rate negotiation dance a year or so ahead of that, say mid 2013 at the earliest. But mid 2012?
Westergren declared “the royalty crisis is over!” in July of 2009. Barely 3 years later they’re back?
Not only is this incredibly early, but Pandora’s strategy does not seem likely to produce a quick result. As far as we can tell from reading the press, the company hasn’t reached out to anyone on the other side of the table and instead went straight to Capitol Hill to try to use their lobbying might along with the truely fearsome National Association of Broadcasters to jam a loathesome price control bill down the throats of musicians and vocalists.
Why? Why start the dance on new rates by introducing legislation in the waning days of one Congress that surely will need to be taken up again in the next, a full 2 years and a bit before the old rates will lapse, at least 18 months before anyone expected that Pandora would start negotiations.
As Google suggested in the SOPA hearing before the House Judiciary Committee, follow the money.
The insiders in an IPO (like company officers) are usually prohibited from selling their personal shares for at least 6 month after the IPO–Facebook stockholders, you know what I’m talking about, and we feel your pain. Since January 2012 (presumably when the lockup came off from Pandora’s June 15 IPO), Tim Westergren has been selling 85,000 shares a month. Exactly 85,000 shares per month, most recently on October 3.
This is almost always a sign of what is probably an insider selling plan (used to be called a 10b5 plan and maybe still is). These plans are designed to allow insiders like Westergren to cash out their stock positions (especially pre-IPO stock options for which they have exercised) even if they are in possession of material nonpublic information at the time of the sale. (No buying and selling or “trading”, just selling). Somewhere while those shares are being sold off, the officer will probably be granted new stock options in the registered stock, i.e., freely tradable shares of P if exercised. If that hasn’t happened already.
This means that Westergren’s insider stock sales makes him about $1 million a month just from selling stock until he liquidates his position. That’s fine, he’s earned it. No complaints.
What is his position? 2,042,439 shares as of October 3. If you divide that number by 85,000 you get 24.
That means that as of this month, he will have fully liquidated his position in 24 months if he continues selling 85,000 shares a month which seems to be the plan. So by keeping Wall Street focused on the bright and shiny object of price fixing through the IRFA legislation, is he more or less likely to keep Pandora’s stock price propped up long enough to finish his exit? And bank roughly $30 million. (This is in addition to the shares he sold in the 2010 “investor offer” that netted him $2.1 million according to Pandora’s S-1.)
But he wants to dictate to his “middle class musician” just how much they should make by union busting and lobbying. Because every dollar Westergren can take away from musicians and vocalists–even in the future–is a good story for Wall Street. Why?
Because Pandora’s future is brighter–and the value of Tim’s stock is much more likely to increase–the less Pandora pays to musicians and vocalists.
This is all fine–but don’t try to tell musicians and vocalists that they will get paid less because it’s good for them.