Endeavor Group Holdings has filed a federal lawsuit seeking to recover profits made by Troluce Capital Advisors through an arbitrage strategy challenging its $25bn acquisition by private equity firm Silver Lake, according to a report by Bloomberg.

The lawsuit, filed in New York, alleges that Icahn Enterprises and Troluce accumulated substantial stakes in Endeavor following the announcement of Silver Lake's $27.50-per-share buyout, with the intention of using shareholder litigation to secure a higher valuation. Endeavor claims the investors coordinated their trading activities and collectively acquired more than 20% of the company's shares, with Troluce and Icahn committing close to $1bn to the appraisal challenge.

Endeavor argues that the hedge funds breached federal securities regulations, including rules requiring shareholders holding more than 10% of a company to surrender profits from certain transactions completed within six months. The company also alleges that the investors failed to comply with disclosure requirements governing large share purchases.

The dispute follows separate proceedings in Delaware, where Icahn and other investors are challenging the buyout through fiduciary duty claims and appraisal litigation. Endeavor and Silver Lake have sought to prevent hedge funds that purchased shares after the transaction was announced from pursuing those claims, arguing that the strategy exploits shareholder protections intended for longer-term investors.

According to the complaint, Icahn Enterprises purchased 27.4 million Endeavor shares over three weeks, reportedly accepting an estimated $40m loss on its investment as part of its broader litigation strategy.

The case has intensified scrutiny of appraisal arbitrage, a strategy in which hedge funds acquire shares in takeover targets and pursue legal action to obtain compensation above the agreed acquisition price. The outcome could have wider implications for event-driven hedge funds and their ability to challenge private equity takeovers through Delaware's corporate courts.