Lions Gate Entertainment Corp.'s settlement with dissident shareholder Carl Icahn removed a long-standing threat to the company and its management but didn't do any favors for its stock.
Shares of the Santa Monica film and television studio behind the current release "Conan the Barbarian" and the cable show "Mad Men" dropped 56 cents, or 7%, to $6.96 on Wednesday, following Tuesday's announcement that Icahn had struck a deal to sell nearly all of his 33% stake in Lions Gate.
Icahn agreed to unload his holdings for $7 a share. Lions Gate will buy 25% of the 44.2 million shares, and Mark Rachesky, the second-largest shareholder, behind Icahn, will buy the same amount. The studio has 35 business days to sell the remaining shares at the same price.
In research notes issued Wednesday, analysts said the drop was not surprising.
"We expect [Lions Gate] shares to trade at close to $7 until the sale process is complete," wrote Cowen Group analyst Doug Creutz. "However, we view this announcement as an overall significant positive for … shares. The sale will remove the overhang of Icahn's position and definitively put the dispute behind the company."