Pandora stock plunges then soars after music royalty hike - now up 20%

In a decision that heavily affects Pandora and its investors, the US Copyright Royalty Board announced it would raise royalty rates for "webcasters" like Pandora in 2016.

Pandora's rate will increase from 14 cents (per hundred streamed songs) to 17 cents for non-subscription streams.

Pandora had asked the board to cut the rate down to 11 cents.

On the other side, SoundExchange, the group that manages digital royalties for the record industry, wanted it to climb up to 25 cents.

The board also set the rate for Pandora subscribers, who don't have to listen to ads, at 22 cents. This has much less of an effect on the company, as it has said that 95% of its customers choose the free version, according to Ars Technica.

In after-hours trading, the Pandora's stock first plunged as much as 33%, and then quickly recovered and soared. It's up around 20% right now.

The board declined to set the royalty rates for 2017 to 2020, saying they would be "adjusted to reflect the increases or decreases."

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