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Pandora shares whipsaw amid massive investment, boardroom shakeup and strategic review

  • Pandora shares bounced between gains and losses of nearly 5 percent after hours Monday, following its announcement of a $150 million investment and mixed financial results.
  • The streaming company said two board members would resign as it gears up for a potential sale.
  • The shakeup presents yet another twist in the company's quest to become profitable by the end of this year amid a "rapidly changing, complex market."
Tim Westergren
Michael Newberg | CNBC
Tim Westergren

Pandora shares whipsawed in after-hours trading on Monday, after it announced a $150 million investment and mixed financial results, and said that two board members would resign as the company gears up for a potential sale.

The stock initially bounced between gains and losses of nearly 5 percent after hours.

KKR — an investment firm known for its private equity and hedge funds — will invest $150 million in Pandora in exchange for new shares of preferred stock, the companies said on Monday. KKR could up the deal, which must be reviewed by regulators, to $250 million, the companies said.

KKR's Richard Sarnoff will also join Pandora's board — but two other directors will leave. Venture capitalist James M. P. Feuille and technology investor Peter Gotcher will resign from Pandora's board, and a committee will appoint new directors, Pandora said.

"Having secured a significant financial commitment from KKR to strengthen the Company's balance sheet, we have positioned the Company to evaluate any potential strategic alternatives, including a sale, in the 30 days before the financing is set to close," outgoing director Feuille said in a statement.

With more competition than ever, the streaming company has faced challenges turning a profit. Corvex Management, a hedge fund run by Keith Meister, had previously pushed Pandora to sell some of its assets, while SiriusXM has been suggested separately as a potential buyer.

Still, Pandora lost less money per share than Wall Street was expecting in the first quarter.

Pandora posted an adjusted loss of 24 cents per share, excluding items, on revenue of $316 million on Monday. That's compared to 34 cents per share on revenue of $318 million expected by a Thomson Reuters consensus estimate. The results showed a 6 percent revenue increase from a year ago.

The shakeup presents yet another twist in the company's quest to become profitable by the end of this year amid a "rapidly changing, complex market."

Pandora has followed in the steps of rivals like Apple Music and Spotify, launching a paid tier of service called Pandora Premium in March. While it's still early, this program is yielding results, founder and CEO Tim Westergren said in a statement.

Pandora has also tried to get more videos, cut costs and expand its ticket-sale business. The app was the fourth-largest non-game app by revenue in the first quarter, above Spotify, according to Sensor Tower.

But while Pandora's early investments in musical taste algorithms and musician relationships have yielded a huge user base, the company has to pay for content and compete with Apple's deep pockets and exclusives.

Pandora's active listeners were 76.7 million at the end of the first quarter of 2017, down from 79.4 million a year ago.

Watch: Pandora CEO on subscription service issues