Steve Cohen increases stake in Sphere during MSG Networks debt situation

Steve Cohen, the owner of the New York Mets, welcomed Juan Soto to spring training after acquiring him in a pricey offseason deal. While Cohen may have won over Soto from the New York Yankees, he remains allied with another New York sports owner in a different investment venture.

Recently, Cohen’s Point72 Asset Management hedge fund increased its stake in Sphere Entertainment by adding over 400,000 shares, as per a recent SEC filing. Sphere Entertainment is controlled by Jim Dolan, who also controls the New York Knicks and Rangers through Madison Square Garden Sports. Point72 now holds 2.1 million shares, representing a 7.3% ownership stake in Sphere.

In the preceding year, Point72 acquired 1.56 million shares in Sphere during the second quarter, amounting to a 5.5% stake, and later added another 110,000 shares in the fall. Cohen initially invested in Sphere at the end of 2023 but cashed out the entire stake in the first quarter of 2024.

Point72 manages assets worth around $37 billion, but a spokesperson declined to comment on their recent investment in Sphere Entertainment. Cohen decided to increase his stake amidst negotiations between lenders and MSG Networks, a subsidiary of Sphere Entertainment, regarding unresolved debt issues. Last October, $829 million in debt was due for the regional sports network, which broadcasts games for the NBA’s Knicks and NHL’s Rangers, Islanders, Devils, and Sabres. Various deadline extensions have been agreed upon between MSG Networks and its lenders, with the latest deadline set for March 26. The rights fees from MSG Networks for the Knicks and Rangers amount to approximately $180 million this year.

David Joyce, an analyst at Seaport Research, highlighted that the outcome of MSG Networks’ debt work-out is crucial for Sphere shares. He mentioned in a research note from December that every $100 million reduction in debt could add nearly $3 per share to Sphere’s value. MSG Networks contributed 52% of Sphere Entertainment’s $1.03 billion revenue for the latest fiscal year. While the Sphere segment reported an adjusted operating loss of $61.5 million, MSG Networks generated an operating profit of $142.3 million.

On Friday, Sphere Entertainment shares closed at $48.20, indicating a 16% increase year to date. The future developments surrounding MSG Networks’ debt situation are expected to impact Sphere Entertainment’s prospects significantly.