What happened
Few investors were amused by Madison Square Garden Entertainment (MSGE -0.18%) stock these past few trading days. According to data compiled by S&P Global Market Intelligence, as of Thursday evening, the fun purveyor's share price was down by almost 15% week to date. The market wasn't smiling about a share sale and related repurchase arrangement announced by the company.
So what
On Tuesday, MSG Entertainment announced that its top institutional investor, Sphere Entertainment Group, is selling 5.25 million of its MSG Entertainment Class A common shares. Subsequent to that, MSG Entertainment aims to enter into an agreement to buy $25 million worth of that stock; using its closing stock price on June 16, this would equate to the purchase of just under 640,700 shares.
MSG Entertainment stressed it would not receive any proceeds from the stock sale, as it is not the selling party.
The entity that is, Sphere Entertainment Group, is an affiliated business active in live entertainment. The most high-profile project directly associated with it is the Sphere, an atypically shaped facility currently being built in Las Vegas. This building is described by Sphere Entertainment as a "next-generation entertainment medium 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 fills both roles at MSG Entertainment. At the moment, Sphere Entertainment holds just under 38% of the company's Class A stock. This gives it 15% voting power. Following the sale of its stock, those percentages will fall to 25% and less than 10%.
Now what
Since MSG Entertainment and Sphere Entertainment are associates and share a leader, it's likely that investors consider the stock sale to be an insider financial engineering move of little or no value to most stockholders. And while share repurchase programs can bolster a stock's price, the one that back-ends this arrangement is too small to make much of an impact.