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Why Lions Gate Entertainment's Stock Is Soaring Today

By Anders Bylund - May 17, 2019 at 3:30PM

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Rumor has it that a major media company might want to buy the Starz property for a cool $5 billion -- and that Lions Gate turned the offer down in search of more money.

What happened

Shares of Lions Gate Entertainment ( LGF-A -1.08% )( LGF-B 0.22% ) are soaring this fine Friday afternoon. The content-production studio's A shares jumped as much as 17.6% higher before settling down to a 12% gain as of 2:42 p.m. EDT.

The company's Class B shares experienced a slightly muted boost, topping out 14.6% higher and retreating to 9.9%. Lions Gate's leap was triggered when tech site The Information said that the company had turned down a generous offer for its Starz property.

So what

According to The Information, CBS ( VIAC -4.12% ) floated an informal offer of $5 billion for the Starz network, but Lions Gate wanted a higher price. CBS is still interested, says the site's anonymous insider sources, and an actual deal might still be in the cards.

A handshake between two men in business blazers in front of a video wall, showing 24 different TV channels.

Image source: Getty Images.

Now what

CBS is reportedly also ready to buy back all of Viacom (NASDAQ: VIA) ( VIAB ), which it spun off in 2005. In general, activist investors have been pushing CBS toward making some big, splashy content production deals, and Starz would certainly fit under that banner. However, Starz is also Lions Gate's crown jewel these days, serving as the company's platform for international growth.

It takes a lot of confidence in the Starz property to turn down a purported $5 billion offer when Lions Gate's two stock classes add up to a market cap of just $6.3 billion. Expect more drama to unfold around this story, especially when Lions Gate reports fourth-quarter earnings next Thursday.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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Stocks Mentioned

Lions Gate Entertainment Corp. Stock Quote
Lions Gate Entertainment Corp.
LGF-A
$14.65 (-1.08%) $0.16
ViacomCBS Inc. Stock Quote
ViacomCBS Inc.
VIAC
$30.95 (-4.12%) $-1.33
Viacom, Inc. Stock Quote
Viacom, Inc.
VIAB
Lions Gate Entertainment Corp. Stock Quote
Lions Gate Entertainment Corp.
LGF-B
$13.65 (0.22%) $0.03

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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