Key Takeaways
- • Endeavor Group Holdings has filed a federal lawsuit in New York seeking to recover profits made by Troluce Capital Advisors and Icahn Enterprises through an appraisal arbitrage strategy targeting Silver Lake's $25bn acquisition of the company, according to Bloomberg.
- • The complaint alleges the investors coordinated trading and collectively acquired more than 20% of Endeavor's shares, with Troluce and Icahn committing close to $1bn to the appraisal challenge.
- • Endeavor argues the hedge funds breached federal securities rules requiring holders of more than 10% of a company to surrender short-swing profits from transactions completed within six months, and failed to meet disclosure requirements for large share purchases.
- • According to the complaint, Icahn Enterprises bought 27.4 million Endeavor shares over three weeks, reportedly accepting an estimated $40m loss as part of its litigation strategy.
- • The case could shape the future of appraisal arbitrage and the ability of event-driven hedge funds to challenge private equity take-privates in Delaware's corporate courts.
Summary
Endeavor Group Holdings has filed a federal lawsuit in New York seeking to recover profits made by Troluce Capital Advisors through an arbitrage strategy aimed at challenging its $25bn acquisition by private equity firm Silver Lake, according to a report by Bloomberg. The acquisition is priced at $27.50 per share.
The complaint alleges that Icahn Enterprises and Troluce accumulated substantial stakes in Endeavor after the buyout was announced, with the intention of using shareholder litigation to secure a higher valuation. Endeavor claims the investors coordinated their trading and collectively acquired more than 20% of the company's shares, with Troluce and Icahn committing close to $1bn to the appraisal challenge. According to the complaint, Icahn Enterprises purchased 27.4 million Endeavor shares over three weeks, reportedly accepting an estimated $40m loss on its investment as part of its broader litigation strategy.
Endeavor argues the hedge funds breached federal securities regulations, including rules requiring shareholders holding more than 10% of a company to surrender profits from certain transactions completed within six months. The company also alleges the investors did not comply with disclosure requirements governing large share purchases.
The lawsuit follows separate proceedings in Delaware, where Icahn and other investors are challenging the buyout through fiduciary duty claims and appraisal litigation. Endeavor and Silver Lake have sought to prevent hedge funds that bought shares after the transaction was announced from pursuing those claims, arguing the strategy exploits shareholder protections intended for longer-term investors.
The case has intensified scrutiny of appraisal arbitrage, in which hedge funds acquire shares in takeover targets and pursue legal action to obtain compensation above the agreed acquisition price. The outcome could have wider implications for event-driven hedge funds and their ability to challenge private equity takeovers through Delaware's corporate courts.
The complaint alleges that Icahn Enterprises and Troluce accumulated substantial stakes in Endeavor after the buyout was announced, with the intention of using shareholder litigation to secure a higher valuation. Endeavor claims the investors coordinated their trading and collectively acquired more than 20% of the company's shares, with Troluce and Icahn committing close to $1bn to the appraisal challenge. According to the complaint, Icahn Enterprises purchased 27.4 million Endeavor shares over three weeks, reportedly accepting an estimated $40m loss on its investment as part of its broader litigation strategy.
Endeavor argues the hedge funds breached federal securities regulations, including rules requiring shareholders holding more than 10% of a company to surrender profits from certain transactions completed within six months. The company also alleges the investors did not comply with disclosure requirements governing large share purchases.
The lawsuit follows separate proceedings in Delaware, where Icahn and other investors are challenging the buyout through fiduciary duty claims and appraisal litigation. Endeavor and Silver Lake have sought to prevent hedge funds that bought shares after the transaction was announced from pursuing those claims, arguing the strategy exploits shareholder protections intended for longer-term investors.
The case has intensified scrutiny of appraisal arbitrage, in which hedge funds acquire shares in takeover targets and pursue legal action to obtain compensation above the agreed acquisition price. The outcome could have wider implications for event-driven hedge funds and their ability to challenge private equity takeovers through Delaware's corporate courts.
Go deeper than the headline
Research every firm in this story, track the ones that matter and get the daily briefing — free for 7 days.