Updated 4:30 p.m. ET

Online music service Pandora Media (P) saw a nice jump in its initial public offering Wednesday. The company raised about $235 million, pricing shares at $16 each.

The stock opened at $20 surged to $26, but ended up closing the day at $17.42. At the $20 opening, the company was valued at more than $3 billion. Fairly outrageous, since Pandora has never made a profit, gets revenue mostly from advertising and faces enormous competition.

Check out this video discussion about Pandora's pros and cons and why the company can't achieve economies of scale.

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Still, the investor response was fairly predictable, given what we've seen with tech IPOs this year. LinkedIn (LNKD), Yandex (YNDX) and other companies saw enormous jumps in first-day trading. And those with small offerings -- Pandora sold only 9.2% of its total shares -- can see even more demand.

• Related: Why Pandora will rock Wall Street

"There's pent-up demand for high-growth, exciting business models," one asset manager told Bloomberg. "There's demand, and there just aren't many ways to get access to it."

But Rolfe Winkler argues in The Wall Street Journal that investors shouldn't chase Pandora. The company is paying more royalties to stream music, and it depends on advertising for 90% of its sales. Only about 1% of Pandora's listener hours are for advertising, compared with 20% for traditional radio, he adds.

And though Pandora is landing some key partnerships -- Ford (F) will add the service to some of its vehicles -- "meaningful profits could be years off," Winkler adds.