Any hopes DraftKings had of starting 2022 drama-free were dashed after GNOG shareholders filed two new lawsuits over the pending $1.56bn takeover. [Image: Shutterstock.com]
Suing for documents
Sports betting operator DraftKings has experienced some choppy waters of late, and its situation has just worsened after the filing of two new lawsuits over its pending $1.56bn Golden Nugget Online Gaming (GNOG) takeover.
Fertitta agreed to stock exchange terms that unfairly benefitted him
The pair of complaints, filed in the Delaware Court of Chancery by two GNOG shareholders on December 28, allege Golden Nugget chairman and CEO Tilman Fertitta agreed to stock exchange terms that unfairly benefitted him and his other holdings and benefits.
The suits, made public Monday, request documentation to examine the alleged “wrongdoing” in the deal announced on August 9.
According to EGR Intel, GNOG minority shareholders Steven Eschbach and Anthony Franchi filed one suit under Delaware’s General Corporation Law. Another investor, Carl Grove, later launched his own lawsuit against GNOG, in which Houston Rockets’ owner Fertitta holds 79% of shares.
Questions asked over share price
The two new lawsuits follow an investigation into the DratfKings-GNOG deal launched by US class action law firm Monteverde & Associates in early December. On behalf of shareholders, the firm aimed to assess whether the agreement violated securities law.
The fresh lawsuits have requested access to multiple pieces of information and documents. These range from financial statements, corporate minutes, projections, and fairness opinions, to documentation detailing the independence of or conflicts of interest involving directors and legal advisers.
“Plaintiffs have a more-than-credible basis to suspect wrongdoing in connection with the transaction, which was entered into at an unfair price that DraftKings’ CEO publicly described as a ‘steal’,” the Eschbach and Franchi complaint said.
Grove’s lawsuit also follows the trail of alleged wrongdoing. It notes “serious concerns” over the impartiality of Jefferies LLC, GNOG’s legal advisers on the acquisition.
at least four of the six members having extensive personal and business ties with Fertitta”
“The board that approved the merger and related side deals was conflicted, with at least four of the six members having extensive personal and business ties with Fertitta,” Grove’s complaint alleged. It went on to assert that Jefferies was “a joint venturer in other Fertitta-controlled entities and prior lender to Fertitta.”
Web of benefits
The deal also included an exclusive commercial agreement with Fertitta Entertainment Inc, the holding company of land-based casino brand Golden Nugget. This would see DraftKings enjoy reduced market-access rates via preferred pricing at Golden Nugget properties.
In addition, DraftKings landed exclusive daily fantasy sports, sports wagering, and iGaming partnership rights for the Houston Rockets, with the goal of launching a sportsbook at the franchise’s Toyota Center.
Unpacking this agreement, Grove’s lawsuit probes the potential conflict arising from the “unique benefits” inherent in the commercial deal, benefits GNOG’s other stockholders would not be party to.
These fresh challenges pile the pressure on DraftKings, which is also facing a review by the US Securities and Exchange Commission in the near future.
(this story/news/article has not been edited by PostX News staff and is published from a syndicated feed)