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Lions Gate stock drops after Icahn settlement

August 31, 2011 |  2:06 pm

ConanPerlman
Lions Gate Entertainment’s settlement with dissident shareholder Carl Icahn removed a longstanding threat to the company and its managment but didn’t do any favors for its stock.

Shares in the Santa Monica film and television studio behind the current release “Conan the Barbarian” and the cable show “Mad Men” dropped 7% to $6.96 on Wednesday after Tuesday’s announcement that Icahn had struck a deal to sell nearly all of his 33% stake in Lions Gate.

The stock settled at just below the $7 price at which Icahn agreed to unload his holdings. Lions Gate will buy 25% of the 44.2 million shares, while Mark Rachesky, previously the second-largest shareholder behind Icahn, will buy the same amount. The studio has 35 business days to sell the remaining shares at the same price.

In research notes issued Wednesday, analysts said the drop was not surprising.

“We expect [Lions Gate] shares to trade at close to $7 until the sale process is complete,” wrote Cowen and Company analyst Doug Creutz. “However, we view this announcement as an overall significant positive for … shares. The sale will remove the overhang of Icahn’s position and definitively put the dispute behind the company.”

Lions Gate stock traded as high as $7.65 last fall amid Icahn’s attempts to acquire shares and take control of the company. After Icahn abandoned those efforts last December, the stock dropped below $6 in the winter before climbing to $7.52 on Tuesday.

Some on Wall Street were surprised at Icahn’s abrupt decision to exit Lions Gate, which may have also contributed to the stock’s decline.

“This came out of left field for investors and creates some uncertainty,” said Hudson Square Research analyst Marla Backer. “A lot of people don’t want to be exposed to a situation that they don’t understand.”

Going forward, Lions Gate executives are pinning their hopes on a much-needed new movie franchise for the studio, “The Hunger Games,” the first in a planned series of four movies based on the bestselling books that will hit theaters in March.

— Ben Fritz

RELATED:

Icahn ends battle with Lions Gate, agrees to sell stake

Icahn boosts MGM and Lions Gate stakes as he presses for merger

Lions Gate revenue shrinks, profit rises with only one film release

Photo: Ron Perlman in "Conan the Barbarian." Credit: Simon Varsano / Lionsgate.

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