Internet radio company sets opening price of $16 a share

Internet radio service Pandora is set to go public on Wednesday, with its initial offering pricing stock at $16 per share, placing the company’s initial valuation at about $2.6 billion.

Stock price is substantially more than the amount suggested by its earlier estimate, which ranged between $7 and $9 dollars per share, later upped to between $10 and $12. Pandora is initially offering 14.7 million shares.

While it is not the only Web 2.0 company to go public recently — Linkedin went public in May, and Groupon filed for an IPO earlier this month — Pandora is only the second music-based venture to field an IPO after Napster parent Roxio in 2004.

Pandora’s revenue is overwhelmingly ad-based, and while it is unquestionably the leader in the Internet radio space, it sees substantial portions of its revenue siphoned away by licensing fees. In its S-1 registration statement filed with the SEC in February, the company said it expects to incur operating losses “on an annual basis through at least the end of fiscal 2012.”

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