LION - Lions Gate Still Needs A Strong Film Slate After Starz

2024-06-30 01:58:23 ET

Summary

• Lions Gate Entertainment is nearing its final spin-out of the Starz streaming product.
• Shareholders can now hold a direct investment in Lionsgate Studios via a separate stock currency.
• The company's streaming experiment essentially failed, hopefully leading to a shift towards prioritizing theatrical releases and attracting potential buyers.
• CEO Jon Feltheimer must focus on scoring hits at the box office, looking to successful models like A24 and Blumhouse for inspiration.
• Based on valuation and speculation of a buyout (of which there is no guarantee), the company is a buy, but only for those who accept the contrarian risk, which is significantly high in this case.

Lions Gate Entertainment ( LGF.A ) ( LGF.B ) is getting closer to its final spin-transaction. As it stands now, for owners of the current A/B shares (like myself), Starz is still part of the situation, while the A/B parent owns the vast majority of the Lionsgate Studios ( LION ) float. Eventually, the dual-share-class structure will be simplified (as mentioned in the conference call from Q4), Starz will float away (with some bonds attached), and what will be left is a direct investment in, as CEO Jon Feltheimer likes to put it, a pure-play, platform-agnostic, content arms-dealer.

For Lions Gate, the streaming experiment was performed, and it failed. The company never really wanted to perform such a test - indeed, it was just John Malone seeing what a new combination of assets would yield. In this case, not so much. It was an interesting idea, especially when streaming was all about subscriber growth and a more direct relationship with consumers - but at the time, it meant investing in exclusive content backed by an ad-free environment. That was never Feltheimer's forte, as Lions Gate's DNA was primarily composed of genes that coded for content that was supplied to (hopefully) the highest bidder....

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