No sooner was Tom Cruise dumped by Paramount Pictures on Wednesday than a media hunt began for sightings of the actor, hoping to record more evidence of the erratic behaviour cited by the studio for severing its 14-year relationship with Hollywood’s most powerful star.

Most expected Cruise to lie low, stinging from the accusation by Sumner Redstone, the 83-year-old chairman of Viacom, Paramount’s parent company, that the actor’s “creative suicide” had cost the studio £79m in ticket sales for the blockbuster Mission: Impossible III.

Redstone didn’t need to spell out what he meant. Cruise’s sofa-trampolining declarations of love for the young actress Katie Holmes on the Oprah Winfrey Show last year and his fervent embrace of Scientology had been compounded by his rant against Brooke Shields for using antidepressants to treat post-natal depression.

So the pack of reporters and paparazzi who roamed the streets of Los Angeles were ecstatic to receive a tip that the 44-year-old actor and his fiancée Holmes were visiting Orso, their favourite restaurant in neighbouring Santa Monica. Better still, they had brought their four-month-old daughter, Suri, a baby never seen in public and shrouded in such secrecy that some even suggested it had been a pillow underneath Holmes’s dress.

In the tumult that ensued, a photographer from the agency X-17 claimed to have taken a picture of Suri, which was hawked around the tabloids for a reported $5m. There were no takers: the picture showed a featureless bundle. However, such is the delirium around Cruise that there was wild talk of breaking into the printers of Vanity Fair, which promises to feature pictures of Suri in its October issue, out this week.

Cruise’s next sighting, the following day, was puzzling. He was seen visiting the headquarters of Terry Semel, the chairman and chief executive of Yahoo. Cruise was up to something, but what? If the speculation turns out to be correct, he could pull off a coup that will turn the movie industry on its ear.

Meanwhile, as Cruise’s expulsion from the Paramount lot began to sink in, people began to wonder who exactly was behaving suicidally. The star has accounted for 32% of Paramount’s profits in films such as Top Gun, War of the Worlds and the Mission: Impossible series. His 27 movies have grossed $5.6 billion and two months ago he was named the world’s most powerful film star by Forbes magazine. How could his stock have plummeted so low?

The fuse to last week’s explosion had been smouldering for some time. Paramount, starved of recent profits, thought Cruise was bleeding them white. They had given an annual retainer of $10m to Cruise’s company, in addition to a box- office share of about 20%. Under his “first dollar” agreement, Cruise could take his cut from the box-office receipts before the studio deducted its overheads, even if the film lost money.

Panicked by this year’s wafer-thin profit margins, the movie industry has been getting tough. Paramount has pulled the plug on Believe It or Not, a Jim Carrey project. In a leaked memo, Morgan Creek Productions cracked down on Lindsay Lohan, the party-loving star of Georgia Rule, for being “discourteous, irresponsible” and acting “like a spoilt child”. Disney cancelled a Mel Gibson television series after his drunken rant against Jews.

After Gibson’s abject apologies, fellow actors rallied round to proclaim that the Lethal Weapon star was basically a good fellow. There has been no such chorus from Cruise’s peers, not even from the likes of Jamie Foxx, whom Cruise helped to stardom.

Still, the public dumping of a first-rank star such as Cruise is unprecedented in modern times. “I’m amazed,” says Iain Johnstone, author of the biography Tom Cruise, published next month. “Brad Grey, who effectively runs Paramount, must be livid with his owner.”

According to one theory, Redstone made a low offer to renew Cruise’s deal and had the cosh poised when he declined. Redstone’s wife, Paula Fortunato, was reportedly “incensed” by Cruise’s criticism of Shields and said: “I never want to see another Tom Cruise movie.” A Viacom spokesman conceded that Fortunato “disagrees” with Cruise’s views, but insisted she saw all his films.

Cruise apparently saw the writing on the wall and set up outside financing from hedge funds, a generous source of movie funding. But he will find private equity companies more querulous than Paramount. Hal Vogel, president of Vogel Capital Management, predicts: “That kind of money doesn’t come with strings; it comes with ropes and chains attached.”