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Prof David Carnegie, now of Wellington, was one of a group that founded the theatre in 1974.
Prof Carnegie, now retired, said he was surprised, as the Fortune appeared to have been doing well, and was being innovative with the shows it ran.
He noted Downstage Theatre in Wellington had closed, and the Fortune had also closed for periods in the past.
He hoped thought and energy would be given to looking at a viable rescue.
His concern about the closure was echoed across New Zealand.
Comedian and former Dunedin resident Jeremy Elwood said on social media the news was "heartbreaking", and director Simon Bennett, who worked on Outrageous Fortune and Westside, said he was "terribly sad to hear about the closure".
Creative New Zealand chief executive Stephen Wainwright said the organisation was saddened by the news.
"The theatre has been part of the city's cultural fabric and a home of theatre in the south of the South Island for more than 40 years.
"We acknowledge that this has been an extremely difficult decision for the Fortune Theatre Trust and hugely disappointing for the theatre's staff who have been working to revitalise the theatre."
Creative New Zealand had funded the theatre at a rate of $500,000 a year, and between 1997 and 2016 had provided funding of more than $8.2 million.
New Zealand actor and director Michael Hurst, who recently performed in The Iliad at the theatre, was sad about the closure.
"It's always sad to lose a theatre.
"It was an honour to be in one of the last shows there."
He believed it was time to look to the future and ask questions to find out why people, especially the student population, were not going to the theatre.
University of Otago head of music, theatre and performing arts Prof Stuart Young said the department was "deeply saddened and shocked" by yesterday's announcement.
"We knew the theatre was struggling but we hadn't realised how serious its circumstances were."
As the Fortune Theatre was a venue as well as a company, he was concerned the city could now miss out on touring productions, and that it might be very hard to build up another base to fill the gap.
While the closure represented a significant contraction in the professional theatre industry in Dunedin, there were still other companies which provided opportunities for students, he said.
Christchurch's Court Theatre artistic director Ross Gumbley said he was sad to hear about the closure and "disappointing to see audiences at The Fortune decline in recent years".