Buyer's remorse already may be setting in for some investors in Internet radio station Pandora Media Inc.
After intense demand drove up the price for Pandora's initial public offering of stock, the shares lost nearly a quarter of their value their second day of trading.
Thursday's harsh reversal of fortune left Pandora's stock below its IPO price of $16. The shares fell $4.16, or 24 percent, to close at $13.26.
The downturn indicates the earlier euphoria about Pandora Media may have been misguided. The excitement enabled Pandora Media's IPO to sell for twice as much as an $8 target price set two weeks ago.
The misgivings are bad news for investors who paid as much as $26 on Pandora's first day of trading.
But the circumspection is encouraging for those worried about an investment bubble forming around promising Internet services that have attracted large audiences.
Pandora boasts 94 million users looking for a different kind of radio station. The company, based in Oakland, Calif., streams music over high-speed Internet connections and relies on computer formulas to tailor individual songs for listeners.
The approach hasn't been profitable yet, one reason some analysts thought Pandora had been overvalued in its IPO. The company has lost a total of $92 million during its 11-year history. The problem: Pandora's main source of revenue, advertising, hasn't been growing fast enough to cover the royalties for playing music.
Pandora's IPO came less than a month after the stock market debut of online professional networking service LinkedIn Corp. evoked memories of the dot-com boom in the late 1990s.
LinkedIn's shares more than doubled on their first day of trading to give the company a market value of $9 billion. The stock has plunged nearly 28 percent since then, although it remains well above LinkedIn's IPO price of $45. LinkedIn shares shed $6.35, or 8.5 percent, Thursday to close at $68.27.