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Lionsgate Stock Down as Chairman Sells 20% Stake for $320 Million

Shares of Lionsgate have declined nearly 7% following chairman Mark Rachesky’s announcement that he will sell 10 million shares, representing about 20% of his holdings in the studio, for $320 million.

Rachesky priced the secondary offering Wednesday at $32 a share, marking the first time he has sold shares in Lionsgate in the decade he’s been invested in the company. The stock declined 6.6%, falling $2.23 to $31.45.

The sale, announced after the market closed Tuesday, is being made through a secondary offering through his MHR Fund Management, which holds 51.26 million Lionsgate shares. Rachesky’s stake will go from 36% to 28%.

In a Securities and Exchange Commission 8K filing, management also reiterated its three-year EBITDA guidance of $1.2 billion to $1.3 billion, but indicated it may be trending toward the lower end of that guidance.

“We see any weakness in LGF shares as a buying opportunity and reiterate our Overweight rating and $38 price target,” said Piper Jaffray in a research note.

Wunderlich Securities said it was maintaining its $40 a share target on the stock. FBR Capital Markets trimmed its target by $1 to $39, pointing to the expected performances of the final “Hunger Games” film, which opens in November, and current release “Insurgent.”

“We believe this presumes a ‘Mockingjay Part 2’ performance on par with ‘Part 1,’ while a lift for the finale is possible,” it said. “We also believe the company had seen ‘Insurgent’ trending domestically closer to ‘Divergent’s’ $148 million. Instead, we see $123 million. Internationally, ‘Insurgent’ is already nearly at the $127 million for ‘Divergent,’ and we believe can get close to $160 million; but this performance was expected.”

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