Steven Mnuchin's Lionsgate Stake Surge: A Play for Value or Power?

The entertainment industry has long been a realm of shifting power dynamics, and Steven Mnuchin's recent move to boost his stake in Lionsgate Studios to 12.6%—a 3.1% increase since May 2024—has sent ripples through markets. The former Treasury Secretary and financier's strategic bet raises critical questions: Is this a signal that Lionsgate's shares are undervalued, or a maneuver to secure influence in a post-Starz world?

Mnuchin's Playbook: A Track Record of Strategic Boldness

Mnuchin's career is defined by calculated gambles. As Treasury Secretary under President Trump, he navigated economic crises with precision. In finance, his firm Liberty Strategic Capital has targeted undervalued assets, often with an eye toward operational improvements. The Lionsgate stake isn't his first foray into media: his portfolio includes cybersecurity firm Cybereason and aerospace startup Satellogic, both of which he helped restructure for growth.

This time, Mnuchin's focus is on Lionsgate's 20,000-title library and its separation from Starz in May 2024—a move that streamlined its operations. The SEC filings reveal his entities, including Liberty 77 Capital L.P., now own 35.99 million shares, with flexibility to buy or sell based on performance. The question is: Is he buying for dividends, or is he positioning to push for change?

Lionsgate's Valuation: A Bargain or a Trap?

Lionsgate's valuation has lagged peers like Disney (DIS) and Warner Bros. Discovery (WBD), trading at a P/E ratio of 8.5x versus the sector's average of 14.2x. This discount reflects investor skepticism over its reliance on traditional film releases and competition in streaming. But Mnuchin's move suggests he sees value in its assets—particularly its film studio, which produced box-office hits like The Hunger Games, and its streaming platform, Lionsgate+.

Critics argue Lionsgate's separation from Starz could dilute focus, but supporters counter that the split creates a leaner, more agile entertainment giant. With 87.3% of Lionsgate Studios retained by Lions Gate Entertainment Corp., Mnuchin's 12.6% stake positions him as the largest outside investor—a perch from which he could lobby for strategic shifts, such as mergers or cost-cutting.

Catalysts on the Horizon: Why Now Could Be the Time to Bet

Three key catalysts could unlock Lionsgate's potential:

1. Content Pipeline: Upcoming releases like John Wick 5 and The Hunger Games: Rebellion could drive box-office revenue and streaming subscriptions.
2. Streaming Growth: Lionsgate+ aims to rival Netflix (NFLX) in niche markets, leveraging its library. A partnership with a tech giant or a subscription price hike could boost margins.
3. Cost Rationalization: Post-separation, Lionsgate could slash redundancies, freeing capital for acquisitions or dividends. Mnuchin's influence might accelerate this process.

Risks: Sector Volatility and Leadership Uncertainty

The entertainment sector is no picnic. Streaming wars, talent disputes, and macroeconomic headwinds (e.g., ad revenue declines) loom. Lionsgate's reliance on hit-driven revenue also means misses like John Wick 5 could hurt shares. Additionally, Mnuchin's intentions are unclear: Is he a passive investor or a activist agitator?

The Bottom Line: A Strategic In-Betweener

For investors, Lionsgate presents a high-reward, high-risk opportunity. Mnuchin's stake increase isn't just about shares—it's a bet on the studio's ability to capitalize on its library and pivot to streaming. With shares trading at a 52-week low of $4.50 and a forward P/E of 8.5x, the downside is cushioned, while upside catalysts could push the stock toward $8–$10.

Action Item: Consider a gradual entry into Lionsgate, using dips below $5 as buying opportunities. Monitor Mnuchin's next moves—he's not known for passive holding.

In a sector where content is king, Mnuchin's move may signal that Lionsgate's crown is ripe for reclaiming. The question isn't whether to watch—it's whether to bet.