Sphere Reports $30M in Revenue From U2 Shows, But Debt Funding Plan Causes Stock Tumble

Sphere Entertainment provided the first inside glimpse at the finances of James Dolan‘s $2 billion Sphere project in Las Vegas in a new Securities and Exchange Commission filing on Tuesday (Dec. 5).

Spun off from Madison Square Garden Entertainment in April and now trading on the NYSE as SPHR, the company is expected to report positive adjusted income this quarter thanks to the opening of the venue and a successful run of shows including U2:UV’s Achtung Baby Live At Sphere.

According to Billboard Boxscore, U2‘s 17-show run beginning in September at Sphere generated nearly $110 million in ticket sales. The SEC filing notes that those shows generated a total of $30.7 million in revenue for Sphere Entertainment through Nov. 30. Meanwhile, Sphere Entertainment’s own content offering, Darren Aronofsky’s Postcard from Earth, has generated approximately $44.5 million in total revenue from ticket sales from 111 showings.

U2 played its first show at Sphere on Sept. 29, 2023, kicking off a multi-month run at the venue. Due to the strong demand, 15 more shows have been added in January, February and March 2024, bringing the band’s planned number of performances to 40.

Also in the SEC filing, the company announced plans to raise money through the sale of $225 million in convertible senior notes that are due to mature in 2028, as well as the option for purchasers to buy an additional $33.75 million in notes.

Sphere Entertainment plans to use a portion of the proceeds from the notes sale to fund capped call transactions designed to reduce the potential dilution of its common stock from the conversion of debt into equity. The remainder of the net proceeds will be used for general corporate purposes, including capital for Sphere-related growth initiatives, according to a release announcing the offering. The initial conversion rate, interest rate and certain other terms of the notes will be negotiated between Sphere Entertainment and the initial purchasers.

Sphere Entertainment began the quarter (starting Sept. 30) with $433.5 million in cash on hand, with $123 million coming from advance ticket sales. The principal balance of the company’s total debt at the beginning of the quarter was approximately $1.2 billion, including $932.3 million of debt under the MSGN Credit Facilities. Under the terms of the MSGN deal, $103.1 million in required quarterly amortization payments are due between Sept. 30, 2023, and Oct. 11, 2024.

Shares of Sphere Entertainment dropped nearly 20% in trading after the company announced the debt offering, but bounced back slightly and were down 15.5% to $28.41 at the market’s close.