LGF.A

Major Shareholder Liberty 77 Capital Executes $24.8 Million Buying Spree in Lions Gate($LGF.A) as Analysts Project 25% Upside Potential

04/18/2025 01:16

Liberty 77 Capital LP, a major shareholder of Lions Gate Entertainment ($LGF.A), executed a massive stock purchase of over 3.6 million shares worth approximately $24.8 million during the week of April 7-14, 2025. This represents the largest insider buying spree in recent months, signaling strong confidence in the company's future. This significant buying coincided with market turbulence caused by U.S.-China trade tensions in early April. Notably, Liberty 77 Capital acquired 2.33 million shares (approximately $15.78 million) on April 7-8 alone, precisely when the S&P 500 experienced a substantial decline on April 8. This strategic move appears designed to capitalize on the stock's undervaluation during market weakness. This purchase is not an isolated incident. Liberty 77 Capital has consistently bought $LGF.A shares over the past 10 months. Beginning in June 2024, the purchases intensified during August and October-November 2024, before resuming on a large scale in April 2025. The cumulative buying now exceeds 12 million shares, representing an investment of roughly $85 million. In contrast to the major shareholder's aggressive buying, company executives sold shares in December 2024, with CEO Jon Feltheimer selling 100,000 shares ($720,000) and COO Brian Goldsmith selling 30,000 shares ($211,800). These sales were disclosed as being for "estate and tax planning purposes." Lions Gate's stock has shown interesting movement alongside these insider transactions. Starting at $7.85 in early February 2025, the stock surged to $10.24 by mid-February (approximately 30% increase), before retreating to $7.48 in late March and early April. Currently trading around $8.00, the stock shows signs of recovery. While up about 2% year-over-year, it has declined approximately 24% over the past three months. Examining the company's financial situation, Lions Gate's quarterly results announced in February 2025 significantly exceeded analyst expectations, with earnings per share (EPS) of 22 cents versus the projected 3 cents. Revenue reached $713.80 million, surpassing the expected $678.00 million, with net income of $6.4 million. The Television Production segment was particularly strong, with revenue increasing 63% year-over-year to $404.6 million. However, concerns remain about the company's overall financial health. The debt ratio stands at 1.021 (liabilities exceeding assets), and the current ratio is a low 0.31, indicating potential liquidity risks. On an annual basis, the company continues to record a net loss of $297 million, with negative operating cash flow. Lions Gate is approaching a significant strategic transformation. The upcoming annual meeting on April 23 will discuss the planned separation of its Studios and STARZ businesses, a move interpreted as an effort to maximize the value of each division and secure appropriate market valuation. In December 2024, activist investor Anson Funds Management acquired a stake and advocated for exploring strategic alternatives, including a potential sale. The entertainment industry is currently experiencing transformative changes with AI technology advancements. Lions Gate has established a collaborative relationship with AI video startup Runway to adapt to these technological shifts. Additionally, the company is diversifying its content in line with Hollywood's trend toward faith-based films and Western-themed content aimed at middle America. Market analysts maintain an average "buy" rating for Lions Gate, with a median price target of $10.00, suggesting approximately 25% upside potential from current levels. The highest price target stands at $15.00, indicating a potential 87.5% increase. The persistent large-scale purchases by the major shareholder, better-than-expected recent performance, and the upcoming business separation plan suggest that Lions Gate's value may be underappreciated in the market. However, debt burden and cash flow issues remain significant risk factors. Investors should closely monitor the upcoming earnings announcement scheduled for May 21 and the results of the April 23 annual meeting.