Carl Icahn Doubles Stake in Lions Gate; Says Shares Undervalued

Carl Icahn has more than doubled his stake in the Hollywood’s largest independent movie and TV studio - Lions Gate Entertainment (LGF). According to a regulatory filing made earlier this week with the U.S. Securities and Exchange Commission, Mr. Icahn spent more than $86 million to acquire additional shares in Lions Gate - increasing his stake in the company to 9.2% from 3.7%. Mr. Icahn now owns 10.8 million LGF shares (up from 4.29 million shares), which he acquired at various prices.

Known as a corporate raider, Icahn’s latest move raises fresh questions about the billionaire’s intentions for the Vancouver, Canada-based movie studio, which operates in Santa Monica, Calif. Like many other media companies in recent weeks, Lions Gate’s stock has been buffeted by the turmoil on the financial sector and Wall Street in general. Some industry observers believe Icahn may just be bargain shopping as opposed to try and force management changes at a firm he believes is underperforming.

Mr. Icahn said in the filing he believed the shares of the film studio are undervalued and added that his representatives have had discussions with Lions Gate Chief Executive Jon Feltheimer and the company’s senior management. However, Icahn didn’t provide any details about the talks.

According to Reuters, Peter Wilkes, Lions Gate spokesman said:

We’ve had a very open and constructive dialog with Mr. Icahn. Our senior management team has a good relationship with him. We welcome his input, which is always very perceptive. He has a great track record for recognizing undervalued investments. 

Lions Gate’s stock sank to a 52-week low last week printing the tape at $6.05/share, forcing Michael Burns, the company’s Vice Chairman, to sell 672,000 shares in order to meet margin calls triggered by the stock nearing the $6 level. Mr. Burns also welcomed Mr. Icahn’s investment and appreciated Icahn’s view of the studio “as a very underleveraged company.”

Some industry analysts believe Lions Gate would benefit from a merger with a studio such as Metro-Goldwyn-Mayer Inc. or an acquisition by a major Internet giant such as Yahoo (YHOO) where Mr. Icahn serves as a board member.

Icahn has been a shareholder in Lions Gate for three years. At the time of writing, LGF was trading at $7.09, down 0.22 (3.01%).

Disclosure: None