Sphere Entertainment Co., the company behind an expensive, state-of-the-art venue opening this fall in Las Vegas, is selling about a quarter of its stake in MSG Entertainment — 5.25 million shares of Class A common stock — in a secondary offering, the company announced Wednesday. That amount could grow by 787,500 shares if the offering’s underwriters exercise a 30-day option to purchase additional shares at the offering price. 

At MSGE’s $34.83 closing price on Wednesday (June 21), 5.25 million shares would give Sphere Entertainment Co. proceeds of about $183 million, not including underwriting fees. News of the offering caused MSG Entertainment’s share price to fall 12.1% on Wednesday. 

MSG Entertainment is the live events-focused company that spun off from Sphere Entertainment Co. on April 21. It owns and operates such venues as Madison Square Garden, Radio City Music Hall and The Chicago Theatre. Sphere Entertainment Co. includes the $2.3 billion Sphere venue in Las Vegas, regional sports television network MSG Networks. Sphere Entertainment Co. retained approximately 33% of MSG Entertainment’s Class A common stock following the spin-off. After the offering, Sphere Entertainment Co. is expected to retain 25.1% of MSG Entertainment’s Class A common stock. 

Sphere Entertainment is “a highly leveraged business” that “continues to have significant cash needs including continued expenditures on its Sphere initiative,” according to MSG Entertainment’s S-1 registration statement filed Wednesday. In April, MSG Entertainment agreed to loan Sphere Entertainment $65 million in delay draw term loans that are subordinate to the “approximately $1.2 billion of debt of Sphere Entertainment’s subsidiaries.” At $2.3 billion, the Sphere venue in Las Vegas has cost more than $1 billion more than originally projected when the the venue was announced in 2018. In 2019, a more realistic estimate put the cost at $1.7 billion. In the last four years, the Sphere’s price tag was inflated by the COVID-19 pandemic and what the company called “overall complexity” of the one-of-a-kind project.   

Separately, MSG Entertainment will purchase $25 million worth of shares from Sphere Entertainment Co. in a private transaction under its existing $250 million share repurchase program. Thomas Dolan, one of the company’s directors, “has indicated an interest” in purchasing about $10 million of stock at the public offering price, according to the registration statement. The company will fund the purchase with cash on hand and pay the same price the underwriters will pay to purchase shares. The closing of the $25 million repurchase is subject to the closing of the secondary offering. The closing of the offering is not subject to the closing of the repurchase.