Legal challenge launched over DraftKings’ acquisition of GNOG
Two legal practices allege violations of state and federal law over $1.56bn all-stock deal which suggest DraftKings is paying “too little” for the online casino
Two US-based law firms have launched separate investigations against Golden Nugget Online Gaming’s (GNOG) board of directors over its decision to endorse a sale of the business to DraftKings worth $1.56bn.
Pennsylvania legal firms Brodsky & Smith and Rigrodsky Law are investigating GNOG for “possible breaches of fiduciary duty and other violations of federal and state law” in connection with the acquisition which was confirmed earlier this week.
The probe, the firms suggest, could lead to the commencement of class action lawsuits against Golden Nugget.
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 Tillman 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.
“The investigation concerns whether the Golden Nugget Online Gaming Board breached its fiduciary duties to shareholders by failing to conduct a fair process and whether DraftKings is paying too little for the company,” Brodsky & Smith stated in their announcement of the investigation.
The lawyers have each invited GNOG shareholders to contact them to discuss the “legal ramifications” surrounding the investigation further.
The potential class action lawsuits would be the latest in an increasing number of legal issues for DraftKings, which confirmed it was being investigated by the Securities and Exchange Commission earlier this week over the infamous report by Hindenburg Research into its B2B arm, SBTech.
DraftKings was issued with a subpoena by SEC investigators on 9 July concerning certain allegations raised in the Hindenburg Report, which led to five legal firms launching class action lawsuits against the sports betting heavyweight for alleged breaches of federal and state law.
DraftKings has pledged to cooperate fully with the SEC investigation.
In addition, the Boston-based operator will also have to defend itself against claims from four other high-profile litigations in areas including the alleged illegality of DFS contests, as well as a thousand-strong “mass arbitration” lawsuit filed by an unnamed law firm.
DraftKings is also the subject of patent-infringement lawsuits filed last month by Interactive Games LLC and Winview Inc.