LION

Lionsgate Studios ($LION) Down 25% Despite $54M Concentrated Buying by Mnuchin-Linked Fund... Bottom Fishing Opportunity?

06/24/2025 03:37

Lionsgate Studios Corp ($LION) is capturing investor attention due to strong buying signals from major shareholders amid stock price weakness. Despite a nearly 25% decline year-to-date, Liberty 77 Capital, connected to former Treasury Secretary Steven Mnuchin, executed concentrated purchases totaling $54.33 million over May and June. Lionsgate Studios, famous for 'The Hunger Games' series and 'John Wick' franchise, is a major Hollywood studio focusing on film and TV content production. The company completed a strategic spinoff of its STARZ business unit in May, transforming into a structure focused on core content creation. However, despite this strategic shift, shares declined from $8.09 at the year's start to $6.10 by late June, raising investor concerns. Liberty 77 Capital's moves during this decline are noteworthy. Following purchases of approximately 7.42 million shares over May 28-29, they added another 900,000 shares in June. The total acquisition of 8.32 million shares worth $54.33 million represents significant scale at current prices. Particularly notable is this investment firm's connection to STM Partners, established by former Treasury Secretary Steven Mnuchin. This reflects the investment philosophy of Mnuchin, known for his expertise built through networks spanning Wall Street and politics. Investors should pay special attention to the buying timing. Liberty 77 Capital continued purchases not during uptrends but during declining phases. After buying at $6.65 and $6.57 in late May, they continued purchasing even as prices fell to $5.95 and $5.65 in June. This suggests a long-term value investing approach rather than short-term profit-taking. Lionsgate Studios' current financial situation makes this strong buying conviction more meaningful. The company continues to record losses with debt exceeding assets. Q1 results showed adjusted earnings of 21 cents per share, missing analyst expectations of 41 cents. However, revenue of $1.07 billion exceeded the expected $983.77 million, maintaining topline growth. Nevertheless, analysts note that discounted cash flow (DCF) analysis estimates intrinsic value between $8.50 and $12.48 per share. Compared to the current price of $6.10, this suggests considerable upside potential. Analysts' 12-month price target of $10.75 indicates 76% upside potential from current levels. Lionsgate's differentiation strategy also presents positive factors. The company recently partnered with AI firm Runway to develop creative tools using AI models trained on its content. This innovative approach could simultaneously reduce production costs and improve creative efficiency. Creative marketing strategies like the White Castle collaboration for 'Borderlands' movie promotion are also gaining attention. However, investors must consider inherent risks. The entertainment industry faces structural challenges from intensifying streaming platform competition and changing consumer preferences. Discussions about U.S. tariffs on foreign-produced films could pressure production costs. Most importantly, the company's high debt ratio and insufficient interest coverage capability pose short-term liquidity risks. Despite these challenges, the signal investors should focus on is clear. Large-scale purchases by a Mnuchin-affiliated fund, with its industry expertise and political-financial networks, likely represents thorough analysis-based value investing rather than speculation. Particularly, consistent buying during price declines suggests strategic positioning near potential bottoms. Looking at future investment scenarios, optimistically, spinoff effects and AI technology utilization could create synergies improving profitability. Content IP value could also be reappraised in the streaming era. Conversely, the concerning scenario involves industry competition intensifying production costs while revenues stagnate. In this case, financial leverage could become burdensome. The investment decision's core lies in whether the Mnuchin-affiliated fund's investment thesis proves correct. If their perceived value materializes, current prices could represent an attractive entry point. However, given financial conditions, short-term volatility must be expected.

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