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Lions Gate Entertainment

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SalvorHardin
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Lions Gate Entertainment

#259799

Postby SalvorHardin » October 24th, 2019, 10:04 am

Lions Gate Entertainment is an American entertainment company, whose business includes the Lionsgate film studio and the Starz cable TV network (it bought Starz for $4.4 billion in 2016). You’ve probably seen the Lionsgate logo in front of many films, such as the John Wick series which it owns through its subsidiary Summit Entertainment.

It’s not for the faint hearted, being a loss making company whose shares have fallen by almost 75% since its recent peak in January 2018. It cancelled its dividend last year and much of its net asset value is represented by goodwill.

At the current “A” share price of $8.66 its market capitalisation is roughly $1.87 billion (Lionsgate has voting “A” shares and non-voting “B” shares).
Last year (2018-19) Lionsgate made a loss of $1.33 per share. Consensus forecast for 2019-20 is $0.87 per share (forecast PE of 10).

My argument for buying: There’s a lot of change taking place in the movie and television business, with streaming being behind most of it. Lionsgate has an excellent library and the bigger players could buy it out of spare change. CBS was rumoured to have put in a bid of $5 billion for Starz in May 2019.

https://www.hollywoodreporter.com/news/lionsgate-stock-jumps-report-cbs-made-informal-bid-starz-1211756

The downsides are that Lionsgate has a lot of debt (debt exceeds market capitalisation by roughly $1 billion) and much of its asset base is goodwill (remove the goodwill and its net asset value is just over $85 million). That said accounting standards aren’t all that good at valuing intangible assets (e.g. the film and television library) and the pressure on companies to acquire content for their streaming services is going to intensify IMHO.

For me Lionsgate is a punt, so I’ve only put just over 1% of my portfolio into it ("A" shares). I’ve followed Lionsgate for several years and used to own a bigger stake which I sold in 2015 at just over $32. I am hopeful that it will either be taken over in a few years or that it will sell Starz for much more than its current share price is implying.

http://investors.lionsgate.com/

https://en.wikipedia.org/wiki/Lionsgate

djbenedict
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Re: Lions Gate Entertainment

#259834

Postby djbenedict » October 24th, 2019, 11:30 am

I like the investment thesis. Any other contenders in this content/back-catalogue space? I am quiet light on media companies, only holding ITV which I bought way back when (2006 now I look). Not quite in the same league but there is occasional speculation about M&A.

SalvorHardin
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Re: Lions Gate Entertainment

#259917

Postby SalvorHardin » October 24th, 2019, 5:20 pm

djbenedict wrote:I like the investment thesis. Any other contenders in this content/back-catalogue space? I am quiet light on media companies, only holding ITV which I bought way back when (2006 now I look). Not quite in the same league but there is occasional speculation about M&A.

Can't help with other contenders. I've been on the pop with my Father this afternoon and 6 Special Brews are affecting my judgment (the original post was made when I was completely sober; this is post is seriously under the influence).

A quick look says that ITV is about 4 x the capitalisation of Lionsgate. How much is that catalogue of programmes worth?

I had long thought that CBS is worth a look. Unfortunately Viacom thought the same and beat me to it with a bid!

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Re: Lions Gate Entertainment

#260070

Postby flyer61 » October 25th, 2019, 9:31 am

It appears the market reaction to your share purchase was a sharp mark down. Salvor, I think the market disagrees with you. There again no one made it in investing by following the herd.

I get the content argument but that debt implies little left over for the shareholders IMHO. It might be a sellers market for content but maybe not for these folk. They need to extract plenty to show something for the shareholders.

A better play on evolving businesses might be FLUTTER ENTERTAINMENT - FLTR. The American sports betting market is on the cusp of huge growth and it looks like FLTR may end up as the market leader....

SalvorHardin
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Re: Lions Gate Entertainment

#260096

Postby SalvorHardin » October 25th, 2019, 11:17 am

flyer61 wrote:It appears the market reaction to your share purchase was a sharp mark down. Salvor, I think the market disagrees with you. There again no one made it in investing by following the herd.

I get the content argument but that debt implies little left over for the shareholders IMHO. It might be a sellers market for content but maybe not for these folk. They need to extract plenty to show something for the shareholders.

I try not to follow the herd :D . Fortunately I'm in the position where if Lions Gate goes to zero it will have no serious effect on my finances

Yes, there's a lot of debt (taken on to buy Starz) but that's why the price has been marked down so heavily. If, and I admit that it's a big if, they can sell Starz for anything like its worth (as opposed to being a forced seller), the shares should recover substantially.

Regarding djbenedict's question about other media companies with a decent back catalogue and aren't that large (so they might be a tempting purchase for one of the giant media companies), Lions Gate was the only one that I could think of (I was too slow to act on CBS). There are probably several others, but I've never really investigated the sector in that sort of depth - the ones I've looked at seem to have too much in cable TV operations which is something I'd prefer to avoid.

SalvorHardin
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Re: Lions Gate Entertainment

#263069

Postby SalvorHardin » November 8th, 2019, 6:42 pm

In case anyone has followed me into Lionsgate, or is thinking of it, its shares are up 14% today after a good set of second quarter results were released last evening after Wall Street closed.

https://variety.com/2019/film/news/lion ... 97514/amp/

So far I'm up 12%. I've no plans to sell. Disney released good full year results yesterday evening (shares currently up 3.2%) with some positive news about streaming. I'm sure that some of this has rubbed off on Lionsgate, drawing attention to its extensive library and franchises (hence today's price rise).

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Re: Lions Gate Entertainment

#336941

Postby Walrus101 » August 30th, 2020, 12:07 pm

This is starting to rally strongly now, are you still holding Salvador. I like this position also.

SalvorHardin
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Re: Lions Gate Entertainment

#336954

Postby SalvorHardin » August 30th, 2020, 1:07 pm

Walrus101 wrote:This is starting to rally strongly now, are you still holding Salvador. I like this position also.

Still holding. Strongly. I bought a few more in April, May and June; then a lot more after the first quarter results were reported on 6th August. Lions Gate is now my third largest holding. IMHO Lions Gate is a strong candidate to be taken over by another media company looking to expand its film and television library and streaming business.

Things could get interesting in November. There is an agreement which prevents Discovery Communications and Liberty Global from increasing their combined shareholding in Lions Gate to more than 18.5%; this agreement expires in November. The article below was written in November 2015:

"Morgan Stanley’s Benjamin Swinburne thinks Malone might begin next year to transform Starz into a Canadian company through a deal with Lionsgate, thus boosting profit at Starz via a lower tax rate. Starz is the quicker solution since there is an agreement stipulating that Discovery and Liberty Global, together, not purchase more than 18.5 percent of Lionsgate through November 2020, says Swinburne."

https://www.hollywoodreporter.com/news/analyzing-john-malones-complex-courtship-841515

There's a lot more going on. Starz is doing very well, and there has been a lot of bullish commentary after Lionsgate licenced the series "Mad Men" to Amazon. Then there's the appointment of Mignon Clyburn, former Federal Communications Commissioner, to the board in June. Her experience in regulation to me is a sign that the company is being readied for a possible sale.

https://www.hollywoodreporter.com/news/lionsgate-nominates-fcc-commissioner-mignon-clyburn-board-directors-1304770

A couple of interesting articles about Lions Gate have been published on Seeking Alpha in in the last few weeks (links below)

https://seekingalpha.com/article/4371508-lions-gate-looks-to-library-digital-and-starz-to-offset-theatrical

https://seekingalpha.com/article/4370822-lions-gate-unexpected-winner-of-streaming-war

Walrus101
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Re: Lions Gate Entertainment

#336968

Postby Walrus101 » August 30th, 2020, 2:19 pm

SalvorHardin wrote:
Walrus101 wrote:This is starting to rally strongly now, are you still holding Salvador. I like this position also.

Still holding. Strongly. I bought a few more in April, May and June; then a lot more after the first quarter results were reported on 6th August. Lions Gate is now my third largest holding. IMHO Lions Gate is a strong candidate to be taken over by another media company looking to expand its film and television library and streaming business.

Things could get interesting in November. There is an agreement which prevents Discovery Communications and Liberty Global from increasing their combined shareholding in Lions Gate to more than 18.5%; this agreement expires in November. The article below was written in November 2015:

"Morgan Stanley’s Benjamin Swinburne thinks Malone might begin next year to transform Starz into a Canadian company through a deal with Lionsgate, thus boosting profit at Starz via a lower tax rate. Starz is the quicker solution since there is an agreement stipulating that Discovery and Liberty Global, together, not purchase more than 18.5 percent of Lionsgate through November 2020, says Swinburne."

https://www.hollywoodreporter.com/news/analyzing-john-malones-complex-courtship-841515

There's a lot more going on. Starz is doing very well, and there has been a lot of bullish commentary after Lionsgate licenced the series "Mad Men" to Amazon. Then there's the appointment of Mignon Clyburn, former Federal Communications Commissioner, to the board in June. Her experience in regulation to me is a sign that the company is being readied for a possible sale.

https://www.hollywoodreporter.com/news/lionsgate-nominates-fcc-commissioner-mignon-clyburn-board-directors-1304770

A couple of interesting articles about Lions Gate have been published on Seeking Alpha in in the last few weeks (links below)

https://seekingalpha.com/article/4371508-lions-gate-looks-to-library-digital-and-starz-to-offset-theatrical

https://seekingalpha.com/article/4370822-lions-gate-unexpected-winner-of-streaming-war


Cheers

I picked up a small amount around $7, as a punt without too much research, just a hunch, the more I read the more interesting things look. I will prob double my holding next week, if the price doesnt get away from me. Have reduced my single share punts now.

You have any thoughts on MSG, I still hold them showing modest gains, I leave them as a trophy asset currently, I presume they rally post Covid......

SalvorHardin
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Re: Lions Gate Entertainment

#336974

Postby SalvorHardin » August 30th, 2020, 3:00 pm

Walrus101 wrote:You have any thoughts on MSG, I still hold them showing modest gains, I leave them as a trophy asset currently, I presume they rally post Covid......

I sold Madison Square Garden before the recent split into MSG Sports and MSG Entertainment. Quite a bit of the proceeds went into Lionsgate.

MSG's best asset is the New York Knicks. IMHO the NBA has seriously damaged its own brand with political posturing, making the teams much less valuable.

I had doubts when the NBA kowtowed to the Chinese Communist Party last October, with fawning apologies after the Houston Rockets general manager tweeted his support for the Hong Kong protesters. That plus New York shutting down in March led to my selling.

The players recently going on strike as a Black Lives Matter protest is going to seriously damage the NBA. Lots of people are giving up on sports that have become politicised. The NBA gave many more an excuse to quit by doing this.

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Re: Lions Gate Entertainment

#336980

Postby Walrus101 » August 30th, 2020, 3:37 pm

SalvorHardin wrote:
Walrus101 wrote:You have any thoughts on MSG, I still hold them showing modest gains, I leave them as a trophy asset currently, I presume they rally post Covid......

I sold Madison Square Garden before the recent split into MSG Sports and MSG Entertainment. Quite a bit of the proceeds went into Lionsgate.

MSG's best asset is the New York Knicks. IMHO the NBA has seriously damaged its own brand with political posturing, making the teams much less valuable.

I had doubts when the NBA kowtowed to the Chinese Communist Party last October, with fawning apologies after the Houston Rockets general manager tweeted his support for the Hong Kong protesters. That plus New York shutting down in March led to my selling.

The players recently going on strike as a Black Lives Matter protest is going to seriously damage the NBA. Lots of people are giving up on sports that have become politicised. The NBA gave many more an excuse to quit by doing this.


I'm less concerned about the political angle, I think long term NBA will become the biggest global sports brand. It was good timing I guess getting out, generally doing nothing in March and continuing to invest through the period has turned out ok, so I wont best myself up. I think I will just leave it, I had hoped it would be a diversified, but Covid seems to have been a home run of a black swan event for that particular holding.

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Re: Lions Gate Entertainment

#381270

Postby SalvorHardin » January 27th, 2021, 4:06 pm

A quick update. As I type this Lions Gate shares are trading at $15.86, roughly 82% up on my first purchase back in October 2019 (when I started this thread). Its share price has risen by about 40% in 2021.

There hasn't been any major company specific news recently. But the recent announcement that MGM was being put up for sale for an asking price of $5 billion will surely have signalled to many investors that media companies with decent libraries of film and television are worth a lot more than they were a few months ago, hence the strong price rise since then.

https://www.theguardian.com/business/2020/dec/22/hollywood-giant-mgm-puts-itself-up-for-sale-at-5bn

Lions Gate's library is of similar size to MGM and whilst MGM's big franchises are James Bond and Rocky, I'd argue that Lions Gate's "John Wick" is a decent comparator and better suited to a modern audience. There are two more John Wick films in development (due in 2022 and 2023) as well as a TV series based on The Continental hotel from the films and a "Ballerina" spin-off. I know that if our weekly film night group was ever too meet again (all males aged 50 to 60), we'd almost unanimously choose to watch a new John Wick film before a new James Bond :D

https://www.cinemablend.com/news/2552247/why-shooting-john-wick-4-and-5-back-to-back-is-the-best-idea

I'm convinced that my original argument for buying Lions Gate (outlined in this thread's early posts), namely that consolidation in streaming market as players look to expand their libraries of films and television, still holds good.

ViacomCBS, another media company with a bigger library (and lots more television interests) could be an acquisition target, has had a similarly good run with it's shares up by some 52% in 2021, now trading at $55.90 (I managed to buy some at just under $14 last April).

Lions Gate's market capitalisation is just over $3 billion, whilst ViacomCBS is valued at $32 billion and trades on a forecast P/E ratio for 2020 of 12.3, held back in part because of its large exposure to network and cable television. Their strong performance has meant that they are now my two largest holdings, with Disney (another big player in streaming) as the third. I wouldn't be all that surprised if ViacomCBS ended up buying Lions Gate.

Lions Gate's 2020 results are publised on 6th February after Wall Street closes. ViacomCBS's results are due on 12th February before market opening.

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Re: Lions Gate Entertainment

#399552

Postby SalvorHardin » March 27th, 2021, 3:35 pm

A brief follow up. Lions Gate are up 36.5% in 2021, having fallen by just over 1% since my last post on this thread. I'm still of the opinion that Lions Gate will be taken over by a bigger player in streaming at a substantial premium to the current price.

Two of the top performers in the S&P500 in 2021 being Discovery Communications and ViacomCBS, in large part because of their increased focus on streaming.

Two weeks ago ViacomCBS shares hit $102, up 172% in 2021, driven by the combination of renaming its streaming service, investor exuberance and a short squeeze (not as intense as GameSpot).

Yesterday they closed at $48.23 down 27% on the day. A hedge fund is rumoured to have got into trouble and is dumping shares as fast as it can. There's plenty of wailing and gnashing of teeth on the more excitable forums, with many punters having taken big hits, whilst the short sellers have been getting their revenge. Again, the action was not as intense as GameSpot, but a bit more lively than you'd see in the UK for a £50 billion company.

I sold most of my ViacomCBS shares around $90 :D Put some of the profits into Lions Gate and Disney, my two largest holdings.

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Re: Lions Gate Entertainment

#413269

Postby SalvorHardin » May 19th, 2021, 5:00 pm

IMHO the case for Lions Gate has become stronger in the last few days. The merger of Discovery and Warner Media (spun off from AT&T) has created a new large player in streaming and industry gossip is that Amazon has offered $9 billion for MGM.

https://amp.theguardian.com/technology/2021/may/18/amazon-in-talks-to-buy-hollywood-studio-mgm-for-9bn

Last December the talk was that MGM had put itself up for sale for $5 billion.

Media companies who need more content will be looking at acquisitions and/or mergers. Lions Gate is one such potential target.

ViacomCBS is of a similar size to Discovery-Warner, whilst the much larger Comcast is needing to increase its presence in streaming media. I could easily see both looking for acquisitions to scale up their operations.

Lions Gate shares are $18.04 as I type this, up 58% in 2021. That values Lions Gate at $3.4 billion. In terms of content its library has a similar size and quality to MGM IMHO.

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Re: Lions Gate Entertainment

#415697

Postby GrahamPlatt » May 27th, 2021, 11:26 pm

Terribly sorry to read this SH; viewtopic.php?f=99&t=29566&start=60#p415430.
Some people eh? But there are others who are very appreciative. Me for one.

AsleepInYorkshire
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Re: Lions Gate Entertainment

#415702

Postby AsleepInYorkshire » May 27th, 2021, 11:45 pm

GrahamPlatt wrote:Terribly sorry to read this SH; viewtopic.php?f=99&t=29566&start=60#p415430.
Some people eh? But there are others who are very appreciative. Me for one.

Hmm ...

My I offer some thoughts please ... I'm not bothered or envious that Salvor has spotted a stock that has only grown by 51% in a year. That's a pathetic increase in my humble opinion :lol: I mean what was Salvor thinking when he just chanced on this stock and invested £100 in it. Bit of a punt really :lol: Pure luck :lol:

On the other hand I have managed to improve my portfolio position by 2%. Which is magnificent. Trust me, it is. And I can tell you that 2% is far better than 51% any day :lol:

The problem Salvor has is he now has to join this thread and inform me that I am talking out of my butt. And I'm sure he's tempted :shock:

AiY

SalvorHardin
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Re: Lions Gate Entertainment

#415709

Postby SalvorHardin » May 28th, 2021, 12:29 am

AsleepInYorkshire wrote:My I offer some thoughts please ... I'm not bothered or envious that Salvor has spotted a stock that has only grown by 51% in a year. That's a pathetic increase in my humble opinion :lol: I mean what was Salvor thinking when he just chanced on this stock and invested £100 in it. Bit of a punt really :lol: Pure luck :lol:

On the other hand I have managed to improve my portfolio position by 2%. Which is magnificent. Trust me, it is. And I can tell you that 2% is far better than 51% any day :lol:

The problem Salvor has is he now has to join this thread and inform me that I am talking out of my butt. And I'm sure he's tempted :shock:

51%? Check your calculator Sir. Seeking Alpha has 127% :D I'm too drunk to trust my ability to operate a calculator to check it :D

Results reported today were excellent. I wouldn't be surprised if we see $20 a share tomorrow. Still expecting a takeover bid in the next few months. ViacomCBS or maybe Comcast.

Given what Amazon paid for MGM I'd expect that if any takeover would offer a big premium to the current price. Don't want to mention a figure as that would create a sort of anchor / target and I know how this can influence investors' behaviour.

I've been sort of freaking out for the last few weeks. My Father died last month and it hit me really hard. Amongst his many achievements, more than I could ever make, was that he played professional football for Newport County.

They are playing in the Fourth division playoff final, on Monday (I know, they call it League Two but that's as bad as calling Marathon bars "Snickers").

If Dad was alive I'd move heaven and earth to get us to Wembley.

Anyway, I'm watching the playoff on Monday afternoon at 3pm on TV with Mum, having had a coronavirus-delayed wake with some of Dad's friends at lunchtime. We'll be happy and sad at the same time.

As the Queen said, "grief is the price we pay for love"

AsleepInYorkshire
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Re: Lions Gate Entertainment

#415983

Postby AsleepInYorkshire » May 29th, 2021, 7:56 am

SalvorHardin wrote:I've been sort of freaking out for the last few weeks. My Father died last month and it hit me really hard. Amongst his many achievements, more than I could ever make, was that he played professional football for Newport County.

They are playing in the Fourth division playoff final, on Monday (I know, they call it League Two but that's as bad as calling Marathon bars "Snickers").

If Dad was alive I'd move heaven and earth to get us to Wembley.

Anyway, I'm watching the playoff on Monday afternoon at 3pm on TV with Mum, having had a coronavirus-delayed wake with some of Dad's friends at lunchtime. We'll be happy and sad at the same time.

As the Queen said, "grief is the price we pay for love"

I'm sorry to hear of the passing of your Dad. As you have said grief is the price we all pay for love. I hope with time and patience you can begin to celebrate your Dad's life and some of the legacies he left behind. He also left me/us a small legacy too, that's you. Your success with stock picking is enviable. I have great admiration and enjoy reading your thoughts and posts. I don't have your stock picking skills or your insights, which I can assure you I'd buy some of the same tomorrow if such were on sale. Your Dad has left us is a great legacy and at this time my thoughts are with you and your family as you come to terms with that vacant chair at the dining room table.

Take care
AiY

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Re: Lions Gate Entertainment

#416162

Postby flyer61 » May 30th, 2021, 8:11 am

Salvor,

as the sleepy bloke in Yorkshire says I too am sorry to hear of the passing of your Dad. During the last two years I lost my in laws (both sound Yorkshire folk) who I was very fond of as they had been a big part of my adult life. If it is anything like me you will have many memories and thoughts about him over the next little while and I hope they bring a smile to your face.

As to the investing, your insight has always been clear and simple which I and I guess quite a few others are very grateful for. I pooh pooed Lion Entertainment on account of their debt earlier in this thread.......wrong! However I did buy a reasonable amount of Bank of Montreal when you mentioned them....right!!! Let me know where I send my SIPP for you to do your magic :D

Buying more Caledonia on Monday....

If you get a chance have a look at PENN and Draft Kings...

best wishes

Flyer

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Re: Lions Gate Entertainment

#455908

Postby SalvorHardin » November 5th, 2021, 2:32 pm

A quick update. Last night, after Wall Street closed, Lions Gate released its second quarter results (link below). Nothing spectacular in the numbers, but the share price has risen sharply this morning and is up 10.1% at $15.28 as I type this.

http://investors.lionsgate.com/press-releases-and-events/press-releases/2021/11-04-2021-200806617

The excitement is because the company said that it is looking at selling its TV network "Starz" or spinning it off as a separate entity. I think that this has put a "For Sale" sign up for the entire company.

“While we continue to realize substantial synergies from bringing Lionsgate and Starz together, we also see the opportunity to potentially unlock significant shareholder value under a scenario where investors have the ability to value our studio assets and Starz separately,” Lions Gate Vice Chairman Michael Burns said on the company’s earnings call. “Recent transaction multiples in the media space give us confidence that exploring alternate paths is prudent.”

https://www.marketwatch.com/story/lions-gate-stock-jumps-as-company-to-explore-spinoff-or-sale-of-starz-11636072953

IMHO my reason for owning these shares still holds. Consolidation in the streaming video business should hopefully lead to an eventual bid for Lions Gate (or Starz) and given the trade prices for recent deals the shares are at a fairly sizeable discount to the price for a trade sale. Some of the smaller players in streaming, such as Apple and ViacomCBS, could quickly build up their library of films and television programs by buying Starz (which currently has 18 million streaming subscribers) or even all of Lions Gate.

Alternatively spinning off Strz could increase the market value of the sum of the parts. Bear in mind that Lions Gate's current market value is close to $3 billion, it bought Starz for $4 billion back in 2016 and in 2017 Hasbro offered $40 a share for all of Lions Gate.

SeekingAlpha has a lot of coverage of Lions Gate (link below)

https://seekingalpha.com/symbol/LGF.A

There's a lot of value in there, it might however take some time to be released. And of course it is quite possible that a bid never appears and the share price drifts for years. Or that antitrust problems prevent the most likely buyers from putting in a bid.


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