Shares of Santa Monica studio Lions Gate Entertainment took a hit Wednesday, a day after the company’s biggest shareholder, Chairman Mark Rachesky’s MHR Fund Management, announced plans to sell a big chunk of its stake.

In addition to the 10 million shares MHR plans to sell, the firm is also giving JPMorgan Securities, which is underwriting the sale, the option to buy 1.5 million more. MHR Fund Management owns 51 million shares, or about 37 percent of Lions Gate.

Lions Gate’s shares were down about 7 percent Wednesday, closing at $31.45.

In a document related to MHR’s stock sale, Lions Gate also updated its guidance for the next few years, saying it expects its adjusted earnings before interest, taxes, depreciation and amortization – or ebitda – for the three years ending in March 2017 will be “within the lower range” of the $1.2 billion to $1.3 billion range it had announced earlier.

The slightly less optimistic guidance and the big stock sale both represent bad news for the company, said Benjamin Mogil, an analyst with Stifel Nicolaus and Co. In a report to investors, Mogil said the guidance news is bad on its face, while MHR’s decision to sell shares through an underwritten offering – rather than in a single transaction to another investor – indicates the firm couldn’t find an interested strategic buyer.