Online radio company Pandora raised $234.9 million in its initial public offering, pricing the shares above the top of the range as investors sought gains from a limited number of new internet stocks.

The California-based company sold 14.7 million shares yesterday at $16 each, according to data compiled by Bloomberg, after offering them for $10 to $12. The shares will trade on the New York Stock Exchange under the symbol P.

Pandora benefited from demand for technology companies after professional-networking website LinkedIn Corp. and Yandex NV, operator of Russia's biggest search engine, provided first-day gains of at least 55 per cent after their IPOs last month. Investors are flocking to internet offerings after they outpaced the 3 percent gain in US IPOs overall this year.

"There's pent-up demand for high-growth, exciting business models," said Scott Billeadeau, who helps oversee $18 billion at Fifth Third Asset Management in Minneapolis. "There's demand and there just aren't many ways to get access to it," he said. "After LinkedIn, there's definitely some chasing going on."

At the offering price, the company has a market value of about $2.6 billion, or about 19 times last year's sales, compared with about 2.7 times for Sirius XM Radio, the subscription-based satellite-radio service. Sirius XM has a market value of about $7.7
billion.

While Pandora will compete with peers such as Sirius, it may face a bigger risk staying ahead of established technology companies including Apple, Amazon.com and Google that are investing in their own online music offerings.

In addition, startups such as San Diego-based Slacker and San Francisco-based Rdio , as well as CBS's Last.fm, are providing competition by offering music through the internet.

Spotify, the London-based online-music provider that's available in seven European countries, has reached agreements with three major record labels and is close to a deal with a fourth to begin a US service, which could start as soon as next month, people with knowledge of the matter said June 13th.

Founded in 2000 by Tim Westergren under the name Savage Beast, Pandora makes 87 per cent of its sales from advertisements that target users based on age, gender, home postal code and musical taste. Ads support the free radio service, though the company also sells subscriptions to users who prefer to listen without advertising.

Pandora sold about 9.2 per cent of its shares outstanding. For US technology IPOs in the past year, the average float was 24 per cent. Amid scarce supply, LinkedIn's shares more than doubled in their first day of trading, giving the company a valuation of $8.91 billion.

Yandex jumped 55 per cent in Nasdaq Stock Market trading after raising $1.3 billion in an initial public offering that sold above the proposed price range.

Pandora, which has lost $92 million since 2000, planned to sell 6 million shares in the IPO, while existing shareholders planned to offer 8.7 million, according to the filing.

The annual loss shrank to $1.8 million last year from $16.8 million a year earlier as registered users topped 90 million. Royalty costs increased 21-fold since 2007 to $69.4 million last year, while revenue jumped to $137.8 million in the same period.

Hearst, the New York-based publisher, planned to sell 4.4 million shares to pare its stake to 2.7 per cent from 5.7 per cent, the prospectus showed. The largest shareholders, Crosslink Capital, Walden Venture Capital and Greylock Partners, didn't plan to sell shares in the IPO.

Morgan Stanley, JPMorgan Chase and Citigroup led the offering.

Bloomberg