Class action lawsuits mount up in DraftKings’ acquisition of GNOG
Third separate US law firm joins legal challenge into fiduciary duty breach claims
DraftKings’ acquisition of Golden Nugget Online Gaming (GNOG) is facing scrutiny from a new class action lawsuit after a third US law firm instigated legal proceedings.
New York-based Monteverde & Associates has launched solicitations from GNOG shareholders concerned about the all-stock transaction worth $1.56bn at the time, which is currently still awaiting completion.
Monteverde & Associates joins Pennsylvania legal outfits Brodsky Smith and Rigrodsky Law, who first filed their claims in August, just days after the multi-billion-dollar deal was announced.
In all three cases, the legal practices have said they are investigating GNOG’s board of directors for “possible breaches of fiduciary duty and other violations of federal and state law” arising from the deal.
In the case of the Brodsky Smith lawsuit, GNOG, DraftKings and Tillman Fertitta, who owns almost 80% of Golden Nugget’s outstanding voting stock, are named in the suit, as well as several members of GNOG’s board of directors.
The Brodsky suit involving New York resident Peter Wong argues that the deal is unfair because the proposal included no “majority of the minority” provision, a requirement that a majority of the minority investors approve the acquisition.
It also claims GNOG’s board “rushed” the sales process, with no independent oversight taking place.
Instead, oversight was provided by individuals who “serve or are expected to serve as directors on the boards of other entities controlled by Mr Fertitta and his affiliates,” the lawsuit claims.
The $1.56bn sale price has also been called into question, with lawsuits suggesting GNOG “should command a much higher consideration” than that initially agreed with DraftKings.
Under the terms of the deal, shareholders of GNOG, which was spun off from Landry’s-owned Golden Nugget and listed on the Nasdaq via a SPAC, will receive 0.365 shares of New DraftKings’ Class A Common Stock for each share of GNOG they own.
Billionaire Fertitta, who owns a 46% stake in GNOG, has agreed to hold onto all DraftKings shares issued to him as part of the deal for a minimum of one year.
DraftKings is currently facing legal challenges on multiple fronts, with the latest, a lawsuit from pool betting operator Colossus Bets, which has sued the US operator for alleged patent infringement filed last week.
Multiple class action lawsuits are currently also being levied against DraftKings following the highly controversial Hindenburg Research report, which cast doubt on the legality of SBTech’s sports betting supply business in certain parts of the world.
The firm is also facing an investigation by the SEC over the claims made in the report.
GNOG parent company Fertitta Entertainment (FEI) is also facing its own prospective legal headache over its decision to walk away from its own SPAC merger with FAST Acquisition, a deal that was worth an estimated $6.6bn.
The multi-billion-dollar merger talks turned ugly last week with FAST threatening legal action if FEI does not consummate the transaction.