Many investors in
Sphere Entertainment
had hoped the company would offer financial guidance for its Las Vegas venue when it reported earnings Wednesday morning.
They were disappointed as the company offered no guidance for the fiscal year ending in June 2024 and little financial information on the Sphere arena that opened to rave reviews in late September with a concert by U2.
The lack of guidance may be a factor behind the drop in Sphere stock (ticker: SPHR), which fell 4.5% to $31.87 after earlier in the session hitting its lowest level since the arena opened.
It also didn’t help that Sphere’s other business,
MSG Networks,
the regional cable network that broadcasts New York Knicks and Rangers games, saw a continued erosion in its profit amid cord-cutting. MSGN’s adjusted operating profit were down 24% in its fiscal first quarter to $25.2 million.
But the investor focus is on Sphere, which cost $2.3 billion to build, about $1 billion above initial cost estimates.
Sphere CEO James Dolan, whose family controls the company, said the Sphere venue is “already profitable,” adding that it “kind of depends on how you calculate.” Dolan said that it’s generating $1 million a day in ticket sales from its nearly hourlong Postcard from Earth show by Darren Aronofsky that runs several times a day on many days each week. Ticket prices can easily top $100.
Investors are eager to try to understand the economics of Sphere venue, which will rely on a mix of concert ticket sales, original productions, and advertising on its outside skin called the exosphere with over a million LED lights. They didn’t get much to chew on Wednesday.
Sphere is valued at about $1.2 billion with roughly $750 million in net debt. Most of the total debt of about $1.2 billion is non-recourse loans to MSG Networks that needs to be refinanced over the next year.
It has been a tough week for Sphere. The stock fell almost 10% Monday to about $33 after the company disclosed in a filing late Friday that Gautam Ranji, the company’s chief financial officer, resigned effective as of Friday.
The company said the resignation wasn’t the “result of any disagreement with the Company’s independent auditors or any member of management on any matter of accounting principles or practices, financial statement disclosure or internal controls.”
The New York Post later reported that Ranji’s resignation came after an angry bout of “yelling and screaming” with Dolan. On the conference call Wednesday, Dolan said “it wasn’t a great fit” with Ranji.
It may be hard for Sphere to generate a lot of investor excitement soon without any clear idea about what its heralded new arena can earn.
Write to Andrew Bary at [email protected]
Read the full article here
