Key Takeaways
- • Hedge funds brought or attempted to lead proposed class actions challenging at least 11 private equity take-private transactions since 2025, according to an analysis of Delaware Chancery Court filings cited by Bloomberg.
- • Nine of the 14 class actions filed in 2026 involved hedge funds, up from just one in 2024.
- • Icahn Enterprises is co-leading a proposed class action over Silver Lake's $25bn take-private of Endeavor Group Holdings, while other investors pursue appraisal proceedings.
- • Silver Lake filed a lawsuit in September accusing Icahn's firm of collusion with hedge funds in the appraisal proceedings; Icahn's counsel calls the allegations baseless.
- • Empyrean, Verition and other investors failed to become lead plaintiffs in litigation over 3G Capital's $9.4bn Skechers acquisition, where the judge appointed Fiduciary Management instead.
Summary
Hedge funds are taking an increasingly prominent role in shareholder litigation challenging private equity buyouts, using valuation expertise and financial resources to contest transaction prices, according to Bloomberg. Firms named in the reporting include Carl Icahn's investment firm, Glazer Capital and Empyrean Capital. Historically, such proposed class actions were led mainly by individual shareholders and pension funds. The cases generally allege that directors and executives breached their fiduciary duties by approving take-private transactions at prices that undervalued the target companies.
An analysis of Delaware Chancery Court filings shows hedge funds have brought or attempted to lead proposed class actions over at least 11 transactions since 2025. Nine of the 14 cases filed in 2026 involved hedge funds, compared with one in 2024. The activity follows changes to Delaware corporate law, after a number of high-profile companies, including Elon Musk's Tesla, reconsidered their incorporation arrangements. The changes loosened certain deal approval requirements and made it harder for shareholders to obtain company records, which may increase the value of specialist investors' litigation resources.
The strategy is developing alongside renewed interest in appraisal arbitrage. Hedge funds acquire shares after a takeover announcement and challenge the agreed price in court. If a judge finds the company's fair value exceeds the deal price, investors may receive the difference plus accumulated interest. The strategy can backfire, however, if the court values the business below the offer. At least five transactions since 2025 have faced both class actions and appraisal challenges, including Silver Lake's $25bn take-private of Endeavor Group Holdings.
In the Endeavor matter, Icahn Enterprises is co-leading a proposed class action while other investors have pursued appraisal proceedings. Silver Lake has objected to hedge funds that buy shares after a deal is announced, arguing they should not use litigation to seek additional returns while limiting their downside. Silver Lake filed a lawsuit in September accusing Icahn's firm of colluding with certain hedge funds involved in the appraisal proceedings. Icahn's legal representatives rejected the allegations as baseless and said they distract from claims concerning the treatment of Endeavor shareholders.
Hedge funds have not secured lead roles in every case. In litigation over 3G Capital's $9.4bn acquisition of Skechers, Empyrean, Verition and other investors failed to become lead plaintiffs, and the judge appointed Fiduciary Management, which had held shares before the transaction was announced.
An analysis of Delaware Chancery Court filings shows hedge funds have brought or attempted to lead proposed class actions over at least 11 transactions since 2025. Nine of the 14 cases filed in 2026 involved hedge funds, compared with one in 2024. The activity follows changes to Delaware corporate law, after a number of high-profile companies, including Elon Musk's Tesla, reconsidered their incorporation arrangements. The changes loosened certain deal approval requirements and made it harder for shareholders to obtain company records, which may increase the value of specialist investors' litigation resources.
The strategy is developing alongside renewed interest in appraisal arbitrage. Hedge funds acquire shares after a takeover announcement and challenge the agreed price in court. If a judge finds the company's fair value exceeds the deal price, investors may receive the difference plus accumulated interest. The strategy can backfire, however, if the court values the business below the offer. At least five transactions since 2025 have faced both class actions and appraisal challenges, including Silver Lake's $25bn take-private of Endeavor Group Holdings.
In the Endeavor matter, Icahn Enterprises is co-leading a proposed class action while other investors have pursued appraisal proceedings. Silver Lake has objected to hedge funds that buy shares after a deal is announced, arguing they should not use litigation to seek additional returns while limiting their downside. Silver Lake filed a lawsuit in September accusing Icahn's firm of colluding with certain hedge funds involved in the appraisal proceedings. Icahn's legal representatives rejected the allegations as baseless and said they distract from claims concerning the treatment of Endeavor shareholders.
Hedge funds have not secured lead roles in every case. In litigation over 3G Capital's $9.4bn acquisition of Skechers, Empyrean, Verition and other investors failed to become lead plaintiffs, and the judge appointed Fiduciary Management, which had held shares before the transaction was announced.
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