By Erik Gruenwedel | Posted: 26 Feb 2009
Lionsgate CEO Jon Feltheimer and his management team, including president Steve Beeks, should have nothing to fear regarding maverick investor Carl Icahn’s most recent stock purchase, said analyst David Miller with Caris & Co., in Los Angeles.
Icahn Feb. 25 bought another 200,000 shares of Lionsgate, upping his four-year stake in the Santa Monica, Calif.-based mini-major to 14.5%, or more than 16.7 million shares.
Icahn, who is noted for acquiring sizeable stakes in underperforming companies and then exerting pressure on management to make changes, increased his stake in Lionsgate to 12% earlier this month from 9% last October.
In 2005, Icahn bought sizeable stock in Blockbuster and pushed through a reform-minded slate of board nominees that resulted in the ultimate departure of CEO John Antioco.
In a Feb. 23 filing, Icahn hinted he might seek to add to or delete members from the board, a move that could only happen at Lionsgate’s annual shareholder meeting. Feltheimer, in financial calls, has insisted that he welcomes Icahn’s input.
Lionsgate lost $93.4 million in the most recent quarter, compared with a profit of $7.3 million during the prior-year period.
Analyst Miller said Icahn is simply trying to “average down” his investment basis by acquiring stock, which theoretically raises share prices and his margin.
“His sincerely believes the stock trades below intrinsic value and below library value,” Miller said. “He’s looking to make money like any other investor in the company.”
Miller said he doesn’t believe Icahn would push for a sale of the studio in this economic environment. He said nobody knows what his endgame is yet for Lionsgate or if he even has one.
“[Icahn] is putting money to work in a company he believes in, a management team he believes in and in a stock that is very difficult to understand and ridiculously undervalued by the market,” Miller said.
Lionsgate appears to have a winner in Tyler Perry comedy Madea Goes to Jail, which grossed $41 million over the Feb. 20-22 weekend, the fifth-highest February opening release ever.
Icahn was not immediately available for comment.