Sphere Stock Rallies on Plans for Abu Dhabi Venue

Posted on: October 14, 2024, 05:14h. 

Last updated on: October 15, 2024, 09:21h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

Shares of Sphere Entertainment (NYSE: SPHR) rallied late Monday after the company confirmed its second venue will be located in Abu Dhabi, United Arab Emirates (UAE).

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The Las Vegas Sphere lit up on Halloween 2023. Sphere Entertainment announced it’s adding a new venue in Abu Dhabi. (Image: WTVM)

The stock closed higher by 3.39% on volume that was roughly quadruple the daily average after Sphere announced plans for its second property. The original Sphere is located in Las Vegas and has fast become an entertainment fixture in the US casino hub.

This next-generation entertainment medium is expected to be a landmark addition to this premier international capital city, elevating the entertainment offerings for residents and visitors alike,” according to a statement issued by Sphere Entertainment.

News of Sphere’s move into the UAE is another sign of the Emirates’ embrace of Las Vegas-style entertainment. Last week, gaming regulators there approved the region’s first-ever casino license, which was awarded to Wynn Resorts (NASDAQ: WYNN). That company and a local partner are building Wynn Al Marjan Island in Ras Al Khaimah (RAK).

Why Sphere Abu Dhabi News is Significant

Sphere’s UAE expansion plans could allay investor concerns regarding where the company could next add a venue — a relevant line of thinking because some analysts believe the company faces scalability issues.

Last year, London declined to be home to a second Sphere, noting such a venue would likely be too bright and noisy, and potentially disturb residents. That sparked concern in the investment community that Sphere could face limited expansion prospects.

New venues are crucial to the Sphere Entertainment investment thesis because, as Wolfe Research recently noted, the company can add up to $700 million in value for each new property that opens.

Before Monday’s news about Abu Dhabi, Wolfe pointed out a second Sphere was almost a sure thing while assigning odds of 75% that a third such venue would come online at some point. The company didn’t mention other potential expansion sites after Abu Dhabi.

Another Reason for Sphere Stock Rally

Sphere’s Monday stock rally was also supported by news that creditors of Madison Square Garden Network agreed to a month-long forbearance of debt held by the regional sports network (RSN) that came due last Friday.

Sphere announced the deal with those creditors in a filing with the Securities and Exchange Commission (SEC) on October 11. The nearly $830 million in debt held by the RSN accounts for the majority of Sphere’s outstanding liabilities and has been viewed by some in the investment community as a drag on Sphere shares. Even with that cloud hanging over the company, the stock is up 35.42%.

The deal with Madison Square Garden Network bondholders could be a sign that Sphere can restructure that debt without issuing new bonds or shares — moves that would likely irk Sphere creditors and equity investors alike.