A Quantum Computing Science Project – Insider Weekends

For years now, we’ve been selecting a single insider transaction and company to highlight as part of our Insider Weekends series. Sometimes we like to cover a cluster of sales of a company like JP Morgan or write the occasional article on a 10% owner purchasing shares, like the takeover of The Children’s Place by Saudi investment firm Mithaq Capital.

However, now that the typical quiet period around earnings seasons has ended and insider purchases are back in full swing, we were faced with a plethora of companies and insider transactions to choose from this week. We found many of these purchases to be incredibly fascinating, and for that reason, we chose not to cover a single company and instead write briefly about multiple in our list of notable insider buys below.

Editor’s Note: Tamanna Suria contributed to this article.

Welcome to edition 724 of Insider Weekends. Insider buying increased with insiders purchasing $93.72 million of stock compared to $52.52 million in the week prior. Selling also increased to $7.69 billion compared to $4.59 billion in the week prior.

Sell/Buy Ratio: The Insider Sell/Buy ratio is calculated by dividing the total insider sales in a given week by the total insider purchases that week. The adjusted ratio dropped to 82.1. In other words, insiders sold more than 82 times as much stock as they purchased. This week, the Sell/Buy ratio was favorable, compared to the prior week when the ratio stood at 88.13 but continues to remain elevated.

Notable Insider Buys:

1. Sphere Entertainment Co (SPHR): $48.76

Executive Chairman and CEO James Lawrence Dolan acquired 110,156 shares of this entertainment company, paying $46.88 per share for a total amount of $5.16 million. Mr. Dolan increased his stake by 21.18% to 630,195 shares with this purchase.

We wrote about Sphere Entertainment in our Insider Weekends article last week, in which we said the following about the one-of-a-kind entertainment venue:

Sphere: The inaugural 580,000-square-foot Sphere debuted in Las Vegas in September 2023, boasting a capacity for 20,000 guests and a year-round schedule of diverse events. The Sphere was designed by Populous, a global design firm specializing in stadiums and large-scale event venues.

Picture this: The Sphere, is not just the world’s largest spherical structure standing tall at 366 feet and stretching wide at 516 feet but also a visual wonderland with a massive 16K LED screen, spanning 160,000 square feet. The audio experience is just as thrilling with advanced tech for a 3D sound experience that’ll leave you in awe. But it doesn’t stop there; the Sphere adds an extra layer with 4D effects like haptic feedback, scents, and more, ensuring an unforgettable sensory journey. And let’s not forget the exterior—580,000 square feet of programmable LED displays that transform the Sphere into a mesmerizing spectacle.

Billionaire heir to a cable TV fortune and owner of the Knicks, the Rangers, Madison Square Garden, Radio City Music Hall, and other venues, James Dolan invested more than $2 billion in building the Sphere, surpassing its original budget by over $1 billion.

Both outlandish and unique, the Sphere has already seen U2 complete its incredibly successful 40-show residency that generated $159.8 million in revenue, and investors are excited to see what’s in store for the company next. The company still operates under a GAAP operating loss of $159.7 million for the second quarter of fiscal 2024 (ended December 31, 2023), but adjusted operating income was $14.1 million after accounting for depreciation and amortization costs, restructuring costs, mergers and acquisitions costs, and more.

Residencies are a big part of the Sphere business, but the original Sphere Experience – an immersive film titled Postcard from Earth – is a big driver of revenue, and benefits from the steady stream of tourists who are now beginning to view the Sphere as yet another must-see experience during their trip. We had the following thoughts on both the Sphere residencies and the development of new immersive film experiences:

It’s particularly interesting to see that it was the Sphere’s original content that generated the highest revenue for that business. As CEO and Executive Chairman James Dolan mentioned on the Q2 2024 earnings call, high-profile residencies will continue to generate profit but also attention and awareness for other events at the Sphere. The success of U2’s sold-out shows also gives the Sphere more leverage to negotiate better contracts with other artists in the future – in the U2 residency, the band kept 90% of the profits from ticket sales, while the Sphere got 10% and most service fees.

Rumors on the street are that another high-profile artist, like Beyonce or Harry Styles, are the next to be announced for residency in the Sphere. The company has confirmed that their next two acts for 2024 have been confirmed, one of which is Dead & Co, who will be playing for six weeks between May 16th and June 22nd. The third, presumably larger, artist has also committed – though it is up to the artist themselves to announce the show. Demand for tickets remains strong, and just like U2, Sphere expects residencies to last for longer simply due to demand for the artist. Planning for 2025 is also in development, and the company expects it to be another full year of residencies.

The success of the Sphere Experience also gives us hope that the company will continue to develop new shows to be shown in the arena. 

To see Mr. Dolan purchase shares once again this week gives us renewed confidence in the growth of this novel company that seems to entice artists and audiences alike. We look forward to seeing more successful residencies at the Las Vegas Sphere, and perhaps in the long-term, the adoption of the franchise model with multiple Spheres across the globe.

You can view the list of recent insider transactions for Sphere Entertainment Co here.

2. Jazz Pharmaceuticals plc (JAZZ): $117.53

EVP and Chief Financial Officer Philip L. Johnson acquired 12,000 shares of this health care company, paying $119.65 per share for a total amount of $1.44 million. Mr. Johnson increased his stake by 75.32% to 27,932 shares with this purchase.

We weren’t drawn to Jazz Pharmaceuticals by the insider purchase this week, but instead, found the fact that Seth Klarman’s Baupost Group was increasing its stake in the company especially interesting. Seth Klarman is often considered as one of the greatest value investors, and his out-of-print famous book, Margin of Safety, is currently selling for close to $4,000 on Amazon.com. We track Baupost Group’s holdings as part of our Value Gurus tool on our site and taking a look at the Baupost’s 13F filing, we can see large positions in the various companies that make up John Malone’s mass media company, Liberty Global.

Jazz Pharmaceuticals is a drug development company focused on developing treatments for sleep disorders, epilepsy, and more recently, cancer. The company has been steadily growing revenue for over a decade, and while net income was negative in fiscal 2021 and 2022, net income did swing back to a positive $414 million in 2023.

The company has a drug, Lurbinectedin, already approved for small cell lung cancer that is also in Phase 3 and 4 trials for various combinations with other treatments. Another oncology drug, Zanidatamab, has been granted an orphan drug designation and two Fast Track designations for treatment as a single agent and in combination with existing chemotherapy treatments.

On the neuroscience side, the company is actively developing Epidiolex, a plant-derived cannabis-based medicine meant to treat seizures associated with Lennox-Gastaut syndrome (LGS), Dravet syndrome (DS), or tuberous sclerosis complex (TSC) in patients 1 year of age and older. This drug is currently in the Phase 3 stage of testing, and is just one of many other treatments currently in Jazz Pharmaceutical’s pipeline.

We always like to see pharmaceutical companies that are able to generate revenue, remain profitable, and consistently grow their pipeline, and Jazz Pharmaceuticals certainly checks all those boxes. Conversations we have had with research scientists about the company has previously damped our enthusiasm for the company.  With a string of licensing and M&A deals under the company’s belt, we”ll keep an eye on the company and its performance in the coming months.

You can view the list of recent insider transactions for Jazz Pharmaceuticals plc here.

3. EchoStar Corp (SATS): $13.78

Director James DeFranco acquired 90,000 shares of this communication services company, paying $13.21 per share for a total amount of $1.19 million. Mr. Defranco increased his stake by 84.15% to 196,951 shares with this purchase.

Following the closure of the merger between EchoStar and DISH Networks on December 31, 2023, it seems as if co-founder James “Jim” DeFranco has resumed his purchases of the company. EchoStar Communications was first founded in 1980 by Charlie Ergen, Candy Ergen, and Jim DeFranco as a distributor of C-band satellite television systems. In January 2007, EchoStar Communication’s technology and infrastructure assets were spunoff as a separate company called EchoStar, while the remaining company was renamed DISH Networks.

After the merger last year, the two companies have reconsolidated into one once again, and Jim DeFranco has started purchasing shares (albeit in smaller amounts) once again. Dish had been struggling for quite a while, and many investors view the merger as a way for Mr. Ergen (who served as the chairman of both companies prior to the merger, and will continue to serve as chairman of the new combined entity) to allow Dish to access EchoStar’s $1.9 billion in cash and estimated $265 million in free cash. This would help Dish to remain afloat and continue building its 5G infrastructure and wireless strategy – a smart move for the company, but a move that may hurt EchoStar investors in the long-term if these developments don’t pan out.

You can view the list of recent insider transactions for EchoStar Corp here.

4. Dominion Energy Inc (D): $48

Shares of this energy producer and distributor were acquired by 2 insiders:

• Chair, President and CEO Robert M. Blue acquired 21,735 shares, paying $45.91 per share for a total amount of $997,891. Mr. Blue increased his stake by 14.07% to 176,240 shares with this purchase.
• Director Joseph M. Rigby acquired 2,130 shares, paying $46.94 per share for a total amount of $99,990. Mr. Rigby increased his stake by 33.88% to 8,417 shares with this purchase.

You can view the list of recent insider transactions for Dominion Energy Inc here.

5. IonQ Inc (IONQ): $10.81

Director Harry L. You acquired 115,000 shares of this quantum computing systems company, paying $9.28 per share for a total amount of $1.07 million. Mr. You increased his stake by 387.86% to 144,650 shares with this purchase.

IonQ is a quantum computing systems company that went public via a SPAC on October 1, 2021. The company saw their stock price run up rapidly after going public, reaching highs of over $25, before crashing down to lows of around $4 a share. The company has made a steady recovery since then, and is one of the few post-SPAC businesses to trade above the SPAC price of $10.

What IonQ hopes to do is absolutely revolutionary – making use of subatomic particles to store information. If they succeed, they could blow traditional semiconductor companies like Nvidia (NVDA) out of the water. The management team behind IonQ certainly seems capable – Chris Monroe and Jungsang Kim founded the company in 2015 after over 25 years of research, hoping to bring quantum computers out of the lab and into commercial spaces.

The current CEO, Peter Chapman, was the Director of Engineering at Amazon, and is credited with inventing the original sound card for computers and writing the software the Federal Aviation Administration uses to prevent mid-air collisions. One of the co-founders, Jungsang Kim, currently serves as CTO and is a Duke Unversity professor who developed the first semiconductor based on a single photon source.

As is typical of most SPAC companies, IonQ is on a “science project” mission – but possibly one of the most important, fascinating, and world-changing science projects. Unsurprisingly, the company is unprofitable and burning through cash – but looking at the balance sheet, they have about two more years of cash before they’ll need to secure additional funding. If this giant gamble works out, IonQ will truly revolutionize the technology world. While we have no plans of investing in the company directly, we’ll certainly check in periodically to see how development is coming along.

You can view the list of recent insider transactions for IonQ Inc here.

Other Interesting Insider Purchases/Situations:

Keurig Dr Pepper Inc. (KDP): $29.14

Over the last few weeks, multiple insiders of the large-cap beverages company, Keurig Dr Pepper, have been purchasing shares. What’s worth noting here is that these purchases were not made on the open market – and thus, we haven’t been including them as part of our Insider Weekends or Daily Event Driven Monitor articles. Instead, the shares were purchased as part of a secondary offering held by JAB Holding.

We’ve written about Keurig Dr Pepper and JAB Holdings in an Insider Weekends article from a little over a year ago, in which we said the following:

One of the largest beverage companies amongst the likes of Coca-Cola (KO), Keurig Dr Pepper (KDP) is a drink focused conglomerate which owns recognizable brands such as Snapple, 7UP, Dr. Pepper and Keurig. The company was formed through the merger/acquisition of the publicly traded Dr Pepper Snapple Group by the privately held Keurig Green Mountain for $18.7 billion. At the time, Keurig Green Mountain was owned by the investment firm JAB, which had taken Keurig private in March 2016 for $92 per share, or a total of $13.9 billion.

Investors who have been actively investing during the last decade might recollect how Keurig Green Mountain used to trade at a significant premium and was a favorite of short sellers. Unfortunately JAB’s acquisition was a blow to short sellers and remains one of the key risks they must contend with. Keurig Green Mountain remained private for only two years before going public again through the Dr Pepper Snapple Group and JAB remains the majority shareholder in the combined company. JAB Holding has built an impressive portfolio over the years, as it either owns or has a majority stake in companies such as Panera Bread, Krispy Kreme, and Peet’s Coffee. As is common with private equity related companies, Keurig Dr Pepper has a leveraged balance sheet with nearly $12.5 billion in net debt.

As part of this secondary offering, JAB Holdings hopes to take down their ownership to about 21% of Keurig Dr Pepper’s outstanding common stock. They are doing this to invest in a couple of pet insurance businesses. The insiders purchasing shares seems to indicate their renewed confidence in the company, which has been steadily growing revenue since we visited it last. Additionally, through the offering, Keurig Dr Pepper will be repurchasing an aggregate of 35 million shares.

While Keurig Dr Pepper is no Coca-Cola (KO) or Pepsi (PEP), the company has been doing well for its size. We don’t expect rapid growth in the coming years, but will look to see if any other developments occur.

 Notable Insider Sales:

1. Ares Management Corp (ARES): $134.1

Co-Founder & Executive Chairman Antony P. Ressler sold 3,000,000 shares of this alternative asset manager for $130.30, generating $390.90 million from the sale. These shares were sold indirectly by TJ Capital Investors, LLC.

You can view the list of recent insider transactions for Ares Management Corp here.

2. Meta Platforms Inc (META): $505.95

Shares of Meta Platformswere sold by 3 insiders:

• COB and CEO Mark Zuckerberg sold 387,060 shares for $495.60, generating $191.83 million from the sale. A majority of these shares were sold through the Chan Zuckerberg Initiative Foundation.
• Chief Legal Officer Jennifer Newstead sold 585 shares for $495.00, generating $289,575 from the sale.
• Chief Operating Officer Javier Olivan sold 490 shares for $492.13, generating $241,144 from the sale.

You can view the list of recent insider transactions for Meta Platforms Inc here.

3. NVIDIA Corp (NVDA): $875.28

Shares of NVIDIA were sold by 3 insiders:

• Director Tench Coxe sold 200,000 shares for $850.10, generating $170.02 million from the sale.
• Director Mark A. Stevens sold 12,000 shares for $853.54, generating $10.24 million from the sale.
• Director Persis Drell sold 5,000 shares for $845.13, generating $4.23 million from the sale.

You can view the list of recent insider transactions for NVIDIA Corp here.

4. Medpace Holdings Inc (MEDP): $405.65

Shares of this diagnostics & research company were sold by 3 insiders:

• CEO August J. Troendle sold 400,000 shares for $406.59, generating $162.64 million from the sale.
• President Jesse J. Geiger sold 22,321 shares for $403.03, generating $9.00 million from the sale.
• Director Ashley M. Keating sold 472 shares for $415.00, generating $195,880 from the sale.

You can view the list of recent insider transactions for Medpace Holdings Inc here.

5. Airbnb Inc (ABNB): $164.91

Shares of Airbnb were sold by 3 insiders:

• Chief Strategy Officer Nathan Blecharczyk sold 160,000 shares for $160.43, generating $25.67 million from the sale.
• Chief Technology Officer Aristotle N. Balogh sold 90,600 shares for $162.63, generating $14.73 million from the sale. These shares were sold as a result of exercising options immediately prior to the sale.
• Chief Financial Officer Elinor Mertz sold 9,196 shares for $156.76, generating $1.44 million from the sale.

You can view the list of recent insider transactions for Airbnb Inc here.

You can view the full list of sales from this Insider Sales page.

The list of all insider purchases and sales by management people is only available to InsideArbitrage Premium and Plus members.