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Friday, July 12, 2024

Why Shares of Madison Square Garden Entertainment Dive This Week


what happened

Few investors are amused by this madison square garden entertainment (MSGE -2.85%) Stocks in these few trading days.According to the collated data S&P Global Market IntelligenceShares of the entertainment provider were down nearly 15% so far this week as of Thursday evening. The market is not optimistic about the company’s announced share sale and related buyback arrangements.

so what

On Tuesday, MSG Entertainment announced that its largest institutional investor, Sphere Entertainment Group, will sell 5.25 million shares of MSG Entertainment Class A common stock. Subsequently, MSG Entertainment plans to enter into an agreement to purchase $25 million worth of the stock; at the closing price on June 16, this equates to the purchase of nearly 640,700 shares.

MSG Entertainment emphasized that it will not receive any proceeds from the sale of the stock, as it is not the seller.

Sphere Entertainment Group is an affiliate company active in the field of live broadcasting. entertainment. The most high-profile project directly related to it is Sphere, an atypically shaped facility currently under construction in Las Vegas. Sphere Entertainment describes the building as “the next generation of entertainment media that will bring wonder to the world and redefine the future of live entertainment”.

Sphere’s CEO and Executive Chairman is James Dolan, who also holds both roles at MSG Entertainment. Currently, Sphere Entertainment owns just under 38% of the company’s Class A shares. This gives it 15% of the voting power. After selling its shares, those percentages will drop to 25%, down from 10%.

what to do

Since MSG Entertainment and Sphere Entertainment are associated companies and have a common leader, investors are likely to view the stock sale as an internal financial engineering move with little or no value to most shareholders. While share buyback programs can boost stock prices, the size behind the arrangement is too small to have much impact.

Eric Volkman Does not hold a position in any of the aforementioned stocks. The Motley Fool does not have a position in any of the stocks mentioned above.motley fool has a Disclosure Policy.


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