A New York court last week denied Icahn's request for a temporary injunction that would have reduced rival shareholder Mark Rachesky's voting power, The Los Angeles Times reported Monday.
Rachesky, who supports Lions Gates current management team, acquired an additional 9 percent of the company in a debt-for-equity transaction this summer. Icahn owns a larger share, 32.8 percent, but Icahn's shares were diluted with the court's decision to refuse the injunction.
With the court decision, Icahn's control of the company dropped from 38 percent to 32.8 percent, while Rachesky's ownership was increased from 20 percent to 29 percent.
In a statement, Icahn said, "We will continue to monitor the situation at Lions Gate and will aggressively take all action necessary to protect our investment."
However, he also said, "We recognize that it is now virtually impossible for us to prevail in the proxy contest due to the dilutive transaction in question."
Lions Gate shareholders hold their annual meeting Tuesday.