HedgeCo.Net — Endeavor Group Holdings, taken private by Silver Lake in a $25 billion buyout, has asked a federal court in New York to order Icahn Enterprises and hedge fund Troluce Capital Advisors to give up any profits from the arbitrage positions they built to challenge the deal, Bloomberg Law reported.
The suit targets a familiar event-driven strategy: buying shares in a takeover target after a deal is announced and then using litigation to seek a higher price. Endeavor alleges that Icahn Enterprises and Troluce coordinated their trading after Silver Lake agreed to pay $27.50 a share and together acquired more than 20% of the company, with close to $1 billion committed to the challenge, according to Hedgeweek’s account of the complaint.
Endeavor argues the investors violated federal securities rules, including the short-swing profit rule that requires holders of more than 10% of a company to disgorge profits on certain trades made within six months, as well as disclosure requirements for large share purchases. The complaint says Icahn Enterprises bought 27.4 million Endeavor shares over three weeks.
The case runs alongside proceedings in Delaware, where Icahn and other investors are pursuing fiduciary duty and appraisal claims over the buyout. Endeavor and Silver Lake have sought to bar shareholders who bought after the announcement from pursuing those claims, arguing the strategy exploits protections intended for longer-term holders.
For event-driven and merger arbitrage managers, the stakes extend beyond one deal. If the federal claims succeed, they would add a new risk to appraisal arbitrage, a strategy that depends on investors being able to build sizable post-announcement positions and then press for a higher valuation in Delaware’s courts.