Lions Gate Entertainment Corp. said its largest shareholder, Chairman Mark Rachesky’s MHR Fund Management, is selling almost a fifth of its stake in the independent film studio, a sale of about $337 million in stock.
Lions Gate, the studio behind “The Hunger Games” pictures, said Rachesky will sell 10 million shares in a underwritten offering. The company isn’t selling any stock and won’t receive any proceeds, according to a statement Tuesday.
Rachesky, 56, has profited handsomely from Lions Gate, with the stock rising more than fivefold in the past five years. A former Carl Icahn protégé, he has owned a stake since 2004 and backed the Santa Monica, California-based studio in fighting a hostile bid by Icahn in 2010. He became co-chairman of Lions Gate in 2011, and is now non-executive chairman.
Underwriter J.P. Morgan Securities LLC was granted an option to purchase an additional 1.5 million shares. If Rachesky sells the maximum, he will continue to hold almost 40 million Lions Gate shares and remain its largest investor, with at least 27 percent.
Lions Gate fell 3.2 percent to $32.60 in extended trading after the announcement. The stock fell 0.7 percent to $33.68 at the close in New York.
Rachesky is part of a group seeking to buy the Atlanta Hawks basketball team, the Atlanta Journal-Constitution reported on April 3.
In February, Lions Gate increased its shares outstanding to 145.5 million with a stock-swap transaction that gave Lions Gate a 4.5 percent stake in billionaire John Malone’s Starz LLC.
The studio on Tuesday said adjusted earnings before interest taxes, depreciation and amortization were tracking towards lower end of its previous guidance of $1.2 billion to $1.3 billion over the three fiscal years ending in March 2017. Analysts cited the underperformance of some recent films.
“We view both as negative: The guidance for obvious reasons and the secondary not so much of the size of the stake, which we view as manageable, but rather that the secondary signals an inability to sell the stake to a strategic buyer,” wrote Benjamin Mogil, an analyst at Stifel Nicolaus & Co., in a research note. He rates the stock a buy.