Hedge Funds Fight to Lead Suit on Skechers $9 Billion Buyout (1)

Several fund managers are competing with each other to helm a proposed class action lawsuit challenging 3G Capital’s $9.4 billion buyout of Skechers USA Inc.

Multiple investment firms have opposed the takeover, arguing Skechers founder Robert Greenberg and his son reached an unfair agreement with 3G in May 2025 that undervalued the company during the turmoil of US tariffs announced a month earlier. Hedge funds snapped up shares in a so-called arbitrage play hoping a judge might award a higher price.

That’s led to two separate Delaware Chancery Court disputes. In one, multiple investment firms are challenging the price of the deal, which Skechers said at the time was a 30% premium to the 15-day average for the stock. The other is a possible class action by investors accusing Skechers management of breaching their fiduciary duties. Some hedge funds are involved in both.

The legal challenges are different but related. After a corporate law overhaul in Delaware last year, it got more difficult to obtain internal company documents in breach-of-fiduciary-duty cases. As a result, attorneys for hedge funds are filing appraisal lawsuits first to gather those records.

The Skechers appraisal fight — where a judge is being asked to decide on a fair value for the company — is in the middle of discovery with some funds taking early settlements.

Among those vying to lead the proposed class action are hedge funds Verition Fund Management and Empyrean Capital Partners, which acquired most of their Skechers holdings after the deal was announced.

However, other shareholders argued against that at a hearing Thursday, citing potential conflicts of interest because Empyrean and its law firm are also involved in the appraisal case.

“A lawyer can’t faithfully serve two masters,” said Alexandra Sadinsky, who is fighting for hedge fund ODS Capital and a pension plan to take lead of the case, noting that the conflict could hurt any recovery by class members.

Whoever gets selected as lead plaintiff will be able to chose attorneys and exercise control over legal strategy, including possible settlements. Chancery Court Judge Lori Will said she would decide the winner of the leadership contest as soon as possible.

Read More: AQR, Elliott Among Hedge Funds Reviving Appraisal Arbitrage Play

Attorneys for Verition and Empyrean argued their involvement in both legal fights is a selling point to take lead in the class action, citing massive amounts of internal records obtained in the parallel appraisal action. They also claim to be properly incentivized because their two clients hold the biggest combined economic stake valued at almost $625 million, representing about 31% of the class.

Ed Timlin, an attorney for the hedge funds, called the conflict claims “theoretical.”

Ned Weinberger, an attorney for FMI Common Stock Fund, argued his firm was the only one solely representing a long-time shareholder that bought into Skechers years before the deal announcement. The deal closed in September.

“Every group is led by a merger or litigation arbitrager who bought all if not nearly all of their stake specifically for buying in and litigating claims,” Weinberger said. “We’re not taking risks with the class.”

Hedge fund Pentwater Capital Management and a different pension plan that purchased shares before the deal announcement are also seeking to be lead plaintiffs. Their attorney told the judge that Pentwater has the largest economic stake of any litigant and devoted its resources to pursuing a class lawsuit rather than make an appraisal challenge.

“As a group, we dwarf everyone except Verition and Empyrean, which everyone believes is deeply conflicted,” attorney Christine Mackintosh said.

(Update with status of appraisal case, premium paid at time of deal.)

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