An activist investor claims that the market has concluded that Lionsgate is a victim of AI. The investor is urging the studio to demonstrate otherwise or consider selling.

      Activist investor Anson Funds is urging Lionsgate to transform itself for the AI era or consider selling, as stated in a letter to the board reviewed by Semafor. The focus is on how the market evaluates a film library.

      Sagar Gupta from Anson noted, “The emergence of generative AI has caused the market to categorize companies starkly into ‘AI winners’ and ‘AI losers’.” He observed that Lionsgate's stock has sharply and negatively responded to the introduction of new AI video models.

      The specific indicators

      Gupta mentioned Sora and Seedance as the models that affected the stock price, highlighting a clear insight into how equity markets currently assess content ownership. Both models have developed rapidly, with ByteDance’s Seedance 2.5 capable of producing 30-second native 4K video using up to 50 reference inputs—an ability that was not feasible in usable form just eighteen months ago.

      According to Gupta, the prevailing assumption in the market is that a studio is more likely to be adversely affected by AI than to benefit from it.

      The opposing view

      Anson disputes this perspective, arguing that Lionsgate could actually attract a premium due to its possession of approximately 20,000 titles, which generate licensing revenue. The firm claims it has not effectively communicated this to its investors, positing that this is more a marketing issue than a flaw in its business model.

      Their thesis is supported by a recent case: Disney licensed over 200 characters to OpenAI’s Sora and made a $1 billion investment, indicating that studio intellectual property holds value in generative video rather than just being seen as a risk.

      Potential acquisition interest

      Gupta referred the board to recent acquisitions: Amazon’s purchase of MGM, Microsoft’s acquisition of Activision Blizzard, and Netflix’s competition with Ellison-backed Paramount Skydance for Warner Bros Discovery.

      He concludes that both technology and streaming companies have demonstrated their preference for outright buying premium IP instead of merely licensing it. If this trend continues, a catalog of 20,000 titles becomes an appealing target rather than a declining asset. Lionsgate's holdings include Rambo, The Hunger Games, and John Wick—franchises that streaming services are currently lacking.

      Company response

      Lionsgate chose not to comment to Semafor and informed investors during its recent earnings call that it has not engaged in any significant discussions with potential buyers. The company has received informal advice from at least two investment banks but has not engaged either for a formal strategic review. Netflix, a likely acquirer, has publicly denied seeking to acquire the studio.

      Shares have risen 36% this year but have decreased by 7% over the past month, reflecting a market that is still uncertain.

      The larger uncertainty

      It remains unresolved whether AI video will replace studio output or complement it. Text-to-video technologies have already produced award-winning short films, and there is no doubt about the progression towards longer formats. Moreover, these tools are being integrated into current production processes rather than serving as replacements. For instance, startups like Flawless are enhancing Hollywood films on a line-by-line basis, representing an augmentation rather than a replacement.

      Consumer interest is also unconfirmed. OpenAI discontinued Sora as a consumer product after facing backlash, including from the families of Martin Luther King Jr. and Robin Williams, highlighting that generated content entails reputational risks that licensed content does not.

      What is currently being evaluated

      The market is categorizing companies into AI winners and losers based on assumptions that have yet to be substantiated by revenue, with studios inadvertently landing on the unfavorable side of this classification.

      Anson believes this sorting is misguided and that a buyer will recognize this before the market does. Alternatively, if the market is merely ahead of the curve rather than mistaken, it would place those holding the stock in a much worse position.