The US Securities and Exchange Commission (SEC) confirmed on Monday, 4 March 2024 that it had settled charges against HG Vora Capital Management LLC. The investment management firm agreed to pay $950,000 for its failure to disclose ownership interests before its May 2022 acquisition bid for Ryder System, Inc. (R).
HG Vora agrees to pay $950,000 SEC penalty
Legally, companies owning more than a 5% stake in a publicly listed business must report this to the SEC and indicate whether they intend to control or influence the organisation. As of 31 December 2021, HG Vora has owned a 5.6% interest in Ryder, but it only reported this to the SEC in February 2022. In this disclosure, the company also indicated that it had no control purpose.
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By 26 April 2022, the capital manager had increased its Ryder stake to 9.9% with a control purpose. Accordingly, it should have disclosed the development to the SEC at that time, but only did so on 6 May 2022. On the same day, HG Vora contacted Ryder, offering to buy all the outstanding shares for $86 per share, which was well above the trading price.
The SEC investigation found that before approaching Ryder with the acquisition proposal, HG Vora bought swap agreements equalling 450,000 shares of Ryder common stock. Following the announcement of the HG Vora acquisition bid, the Ryder stock price surged.
Mark Cave, the associate director of the SEC’s Division of Enforcement, said:
HG Vora deprived Ryder shareholders of information about its significant stake in the company, while building a large swaps position from which it stood to profit after announcing the Ryder takeover bid.
