Contract analysis

1. This action arises from Defendant Grizzly Peak Research LLC's ("GPR" or "Grizzly Peak") publication and dissemination of knowingly false and defamatory reports targeting Plaintiff Redstone Gaming Corp. ("RGC" or "Redstone"), a publicly traded gaming and media-entertainment company listed on the Nasdaq Stock Market under the ticker symbol "RDGM." GPR's false publications were designed and intended to artificially d

2. GPR is a so-called "short-seller research" outfit that publishes reports about publicly traded companies in which GPR's principals and affiliated investment entities hold significant short positions. GPR's business model is simple and pernicious: GPR acquires a short position in a target company's stock, publishes a report containing sensational and false allegations of fraud, misconduct, or financial irregularity

3. On or about February 7, 2024, GPR published a report titled "House of Cards: Redstone Gaming's Manufactured Earnings" (the "First Report" or "Report 1"), containing false allegations that RGC fabricated approximately $410 million in fiscal year 2023 revenue through fictitious intercompany transactions, engaged in regulatory manipulation, and participated in undisclosed related-party transactions. These allegations

4. In addition to the First Report, upon information and belief, GPR was planning at the time of filing, and intends to publish, at least two additional reports targeting RGC: a second report alleging manipulation of random-number-generator ("RNG") software to inflate payout statistics reported to the Nevada Gaming Control Board (referred to herein as "Report 2" or the "Second Report"), and a third report alleging un

5. As a direct and proximate result of GPR's false publications, RDGM's stock price plummeted immediately upon the release of the First Report, falling from a closing price of $92.14 per share on February 6, 2024, to a closing price of $84.37 per share on February 7, 2024 — a decline of $7.77 per share, or approximately 8.4%, in a single trading session. This decline corresponded to an aggregate loss of approximately

6. By this action, Plaintiff seeks compensatory damages in an amount to be proven at trial, disgorgement and restitution of GPR's ill-gotten short-sale profits, punitive damages in an amount sufficient to deter GPR and others from engaging in similar predatory conduct, preliminary and permanent injunctive relief requiring the removal of GPR's false publications, and all other relief that this Court deems just and pro

II. PARTIES A. Plaintiff Redstone Gaming Corp.

7. Plaintiff Redstone Gaming Corp. ("RGC" or "Redstone") is a corporation organized and existing under the laws of the State of Nevada, with its principal place of business located at 8800 Crimson Ridge Parkway, Suite 1200, Las Vegas, Nevada 89113. RGC was incorporated in Nevada on June 14, 2007, and has continuously maintained its corporate status in good standing with the Nevada Secretary of State since that date.

8. RGC's registered agent for service of process in the State of Nevada is National Statutory Agents, Inc., located at 701 S. Carson Street, Suite 200, Carson City, Nevada 89701.

9. RGC is a publicly traded company whose common stock is listed and actively traded on the Nasdaq Stock Market under the ticker symbol "RDGM." RGC's Employer Identification Number is 88-0412793. RGC files periodic reports with the United States Securities and Exchange Commission ("SEC"), including annual reports on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K. RGC is subject to the repo

10. RGC owns and operates eleven casino-resort properties located across three states: seven properties in Nevada (including the flagship Crimson Ridge Resort & Casino in Las Vegas), two properties in New Jersey (including the Redstone Atlantic City Resort), and two properties in Mississippi (the Redstone Gulf Coast Casino and the Redstone Biloxi Grand). In addition to its brick-and-mortar gaming operations, RGC lice

11. For the fiscal year ended December 31, 2023 ("FY 2023"), RGC reported consolidated revenue of approximately $3.42 billion and earnings before interest, taxes, depreciation, and amortization ("EBITDA") of approximately $812 million, representing an EBITDA margin of approximately 23.7%. RGC's FY 2023 financial statements were independently audited by Pinnacle Audit & Advisory LLP, a nationally recognized registered

12. As of the close of trading on February 6, 2024 — the last trading day before the publication of GPR's First Report — RDGM shares traded at a closing price of $92.14 per share. As of that date, RGC had approximately 73.8 million shares of common stock outstanding, corresponding to a total market capitalization of approximately $6.8 billion.

13. RGC's executive leadership team includes: Marcus J. Calloway, Chief Executive Officer and Chairman of the Board; Priya Ramaswaran, Chief Financial Officer; Derek Olafson, Executive Vice President and General Counsel; and Janelle Hu, Vice President of Investor Relations and Corporate Communications. Each of these officers has served in his or her respective capacity for at least three years and has extensive exper

14. Defendant Grizzly Peak Research LLC ("GPR" or "Grizzly Peak") is a limited liability company organized and existing under the laws of the State of Delaware, with its principal office located at 44 Maiden Lane, 7th Floor, San Francisco, California 94108. GPR was formed in the State of Delaware on or about March 22, 2019.

15. GPR's registered agent for service of process in the State of Delaware is Pacific Corporate Services LLC, located at 1209 Orange Street, Wilmington, Delaware 19801. GPR's Employer Identification Number is 85-3291064. GPR is registered to do business in the State of California and maintains its principal office and day-to-day operations in San Francisco, California.

16. GPR holds itself out as an independent research firm that publishes reports analyzing publicly traded companies. In practice, however, GPR's business model centers on publishing negative research reports about publicly traded companies in which GPR and its affiliated investment entities hold short positions, and profiting from the resulting decline in those companies' stock prices. GPR distributes its reports thr

17. GPR's Managing Member is Tobias "Toby" Fenchurch. Mr. Fenchurch exercises sole or primary control over GPR's operations, including the selection of target companies, the content of GPR's research reports, and the timing of their publication. GPR's Senior Analyst and co-author of the reports at issue in this action is Ava Lin. On information and belief, GPR employs or contracts with a small number of additional re

18. On information and belief, GPR is closely affiliated with Grizzly Peak Capital Partners LP ("GPCP"), a Delaware limited partnership that operates as a private investment fund with estimated assets under management of approximately $185 million. GPCP's general partner is Grizzly Peak Capital GP LLC, a Delaware limited liability company. Tobias Fenchurch is the sole managing member of Grizzly Peak Capital GP LLC an

19. This Court has jurisdiction over this action pursuant to the California Constitution, Article VI, Section 10, as the amount in controversy exceeds the jurisdictional minimum of this Court. The damages suffered by Plaintiff as a result of Defendant's wrongful conduct amount to hundreds of millions of dollars, well in excess of any applicable jurisdictional threshold.

20. Venue is proper in the County of Los Angeles pursuant to California Code of Civil Procedure Section 395 because a substantial part of the tortious conduct at issue — including the publication, online dissemination, and receipt of GPR's false and defamatory reports — occurred in and caused harm within the County of Los Angeles. GPR's reports were published on the internet and were received, read, and relied upon b

21. This Court has personal jurisdiction over Defendant GPR because GPR purposefully directed its tortious conduct into the State of California. GPR's principal office is located in San Francisco, California, and GPR conducts its day-to-day business operations in California. GPR's reports were published via the internet and were specifically targeted at RGC, a company with substantial business operations, employees,

IV. FACTUAL ALLEGATIONS A. Redstone Gaming Corp.'s Business and Market Position

22. RGC is one of the leading gaming and entertainment companies in the United States, with a diversified portfolio of gaming properties, technology platforms, and media assets. RGC owns and operates eleven casino-resort properties across three states — seven in Nevada, two in New Jersey, and two in Mississippi — serving millions of guests annually. RGC's flagship property, the Crimson Ridge Resort & Casino in Las Ve

23. RGC has a strong track record of financial performance and consistent revenue growth. For FY 2023, RGC reported consolidated revenue of approximately $3.42 billion, representing year-over-year growth of approximately 7.3% compared to FY 2022 consolidated revenue of approximately $3.19 billion. RGC's EBITDA for FY 2023 was approximately $812 million, representing an EBITDA margin of approximately 23.7%, which is a

24. RGC's financial statements for fiscal years 2021, 2022, and 2023 were independently audited by Pinnacle Audit & Advisory LLP ("Pinnacle"), a nationally recognized registered public accounting firm. The engagement partner for each of these audits was Walter Ng, CPA, a partner with over twenty-five years of experience auditing publicly traded companies in the gaming, hospitality, and entertainment industries. Pinna

25. As of the close of trading on February 6, 2024, the last trading day before the publication of GPR's First Report, RDGM common stock traded at a closing price of $92.14 per share. At that price, and with approximately 73.8 million shares of common stock outstanding, RGC's total market capitalization was approximately $6.8 billion. RDGM was covered by at least fourteen sell-side equity research analysts at major f

26. GPR's business model is predicated on the publication of sensational negative research reports about publicly traded companies in which GPR and its affiliated investment entities — principally GPCP — hold substantial short positions. In a typical short-sale transaction, the short seller borrows shares of a company's stock, sells the borrowed shares on the open market, and then seeks to repurchase the shares at a

27. GPR publicly disclosed that it held a short position in RDGM stock through a standard disclaimer included in its reports. However, this disclosure was inadequate and misleading. The disclaimer was printed in small type at the end of GPR's reports and stated, in substance: "The author of this report holds a short position in the securities discussed herein and stands to benefit from a decline in the share price."

28. At the time of the publications at issue, GPR and/or GPCP held a short position in RDGM common stock of approximately 680,000 shares. Based on the pre-publication closing price of $92.14 per share on February 6, 2024, this short position had a notional value of approximately $62.66 million. On information and belief, GPR and GPCP began accumulating their short position in RDGM during the fourth quarter of 2023 an

29. GPR's financial motive to publish false and misleading information about RGC was enormous and cannot be overstated. Every dollar of decline in RDGM's stock price translated directly into profit for GPR and its affiliates. Based on the 680,000-share short position, the $7.77 per-share decline in RDGM's stock price on February 7, 2024, alone represented a profit opportunity of approximately $5.28 million for GPR an

30. On or about February 7, 2024, GPR published a report titled "House of Cards: Redstone Gaming's Manufactured Earnings" (the "First Report" or "Report 1") on its subscription website, grizzlypeakresearch.com. GPR simultaneously distributed the First Report and promoted its conclusions via its social media account, @GrizzlyPeakRes, on the X platform (formerly Fenmore Solutions). The First Report was approximately fo

31. The First Report alleged, among other things, that RGC fabricated approximately $410 million in FY 2023 revenue through fictitious intercompany transactions among RGC's subsidiaries. Specifically, the First Report claimed that RGC's reported revenue from its electronic gaming platform licensing business and its Redstone Digital iGaming division was artificially inflated through circular transactions between RGC's

32. On information and belief, at the time this Complaint was filed, GPR was planning and intended to publish at least two additional reports targeting RGC. The second report (referred to herein as "Report 2" or the "Second Report") was expected to be titled "Rigged Reels: How Redstone's Slot Software Cheats the Regulators," and was expected to be approximately thirty-six pages in length. Report 2 was expected to all

33. Each of the allegations contained or anticipated in GPR's reports was, and is, false. RGC's revenue figures for FY 2023 were thoroughly verified through the independent audit conducted by Pinnacle Audit & Advisory LLP and were accurately reported in RGC's Form 10-K filed with the SEC. RGC's RNG systems operate under the continuous regulatory oversight of the Nevada Gaming Control Board, the New Jersey Division of

34. The Revenue-Fabrication Allegation Is False. The First Report's central allegation — that RGC fabricated approximately $410 million in FY 2023 revenue through fictitious intercompany transactions — is categorically false. Pinnacle Audit & Advisory LLP conducted a thorough, independent audit of RGC's consolidated financial statements for FY 2023, in accordance with the standards of the Public Company Accounting Ov

35. The RNG-Manipulation Allegation Is False. To the extent that GPR's anticipated Second Report alleges that RGC manipulated its RNG software to inflate payout statistics reported to the Nevada Gaming Control Board, this allegation is, and will be, false. RGC's electronic gaming platforms, including their embedded RNG systems, operate under the continuous supervision and regulatory oversight of the NGCB. RGC's RNG s

36. The Related-Party Allegation Is False and Misleading. To the extent that GPR's anticipated Third Report alleges undisclosed related-party transactions between CEO Marcus J. Calloway and a purported shell entity called Vermilion Holdings LLC, this allegation is based on incomplete and misleading information and is, and will be, false. To the extent that any transactions involving Vermilion Holdings LLC exist, they

37. Following the publication of GPR's First Report on the morning of February 7, 2024, RDGM's stock price experienced a sharp and immediate decline. RDGM opened trading on February 7, 2024, at $89.62 per share — already $2.52 below the previous day's closing price of $92.14, reflecting pre-market trading activity in response to GPR's publication. Over the course of the trading session on February 7, 2024, RDGM's sto

38. On information and belief, GPR's planned publication of Reports 2 and 3 will cause additional, substantial declines in RDGM's stock price and further damage to RGC's business reputation and its relationships with investors, analysts, regulators, business partners, customers, and the public. GPR has publicly indicated through its social media account that additional reports concerning RGC are forthcoming, creating

39. The aggregate loss in market capitalization attributable to GPR's First Report alone — measured as the per-share decline of $7.77 multiplied by the approximately 73.8 million shares of RDGM common stock outstanding — was approximately $573 million. If GPR's additional anticipated reports cause further declines of comparable magnitude, the total market-capitalization destruction attributable to GPR's campaign of f

40. GPR published its reports with knowledge of their falsity, or with reckless disregard for their truth or falsity. GPR's false allegations were not the product of honest error or good-faith analysis; they were fabricated and disseminated as part of a calculated scheme to profit from the resulting decline in RDGM's stock price. GPR's principals — Tobias Fenchurch and Ava Lin — are sophisticated financial profession

41. GPR's financial motive further demonstrates the malice underlying its publications. GPR and its affiliated fund, GPCP, held a short position of approximately 680,000 shares of RDGM common stock with a notional value of approximately $62.66 million at the pre-publication price of $92.14 per share. This position created an overwhelming financial incentive for GPR to publish false information designed to drive down

42. On information and belief, GPR failed to contact RGC, its auditors at Pinnacle Audit & Advisory LLP, or any applicable regulatory authority — including the Nevada Gaming Control Board, the New Jersey Division of Gaming Enforcement, or the Mississippi Gaming Commission — before publishing the reports at issue. GPR failed to seek comment from RGC's management, its Board of Directors, or its investor relations depar

43. GPR's reports contain specific statements that GPR knew or should have known were false at the time of publication. For example, the First Report's allegation that RGC fabricated $410 million in FY 2023 revenue through fictitious intercompany transactions is directly contradicted by the unqualified audit opinion issued by Pinnacle Audit & Advisory LLP, a nationally recognized audit firm, which was publicly availa

44. As a direct and proximate result of GPR's false publications, RGC has suffered and continues to suffer substantial damages, including but not limited to: (a) The decline in the market value of RDGM common stock, resulting in an aggregate market-capitalization loss of approximately $573 million following the publication of the First Report alone, with additional losses anticipated upon the publication of Reports 2

45. On information and belief, GPR and its affiliated fund, GPCP, have realized or will realize substantial trading profits from the short position in RDGM common stock that they held at the time of GPR's false publications. Based on the 680,000-share short position and the $7.77 per-share decline in RDGM's stock price on February 7, 2024, alone, GPR and GPCP's profit opportunity was approximately $5.28 million. On i

V. CAUSES OF ACTION FIRST CAUSE OF ACTION Trade Libel (Cal. Civ. Code § 46(3)) (Against Defendant Grizzly Peak Research LLC)

46. Plaintiff Redstone Gaming Corp. incorporates by reference each and every allegation set forth in Paragraphs 1 through 45 above as though fully set forth herein.

47. GPR published false statements of fact regarding RGC's business, products, and services. Specifically, GPR published, or has announced its intention to publish, false statements alleging that: (a) RGC fabricated approximately $410 million in FY 2023 revenue through fictitious intercompany transactions; (b) RGC manipulated its random-number-generator software to inflate payout statistics reported to the Nevada Gam

48. GPR's false statements were published to third parties on a wide scale. GPR disseminated its First Report through its subscription website, grizzlypeakresearch.com, and simultaneously promoted and distributed the report and its conclusions through GPR's social media account, @GrizzlyPeakRes, which had approximately 142,000 followers at the time of publication. GPR's false statements were further disseminated thro

49. GPR's statements were false. As set forth in detail in Paragraphs 34 through 36 above, the allegations contained in GPR's reports are contradicted by independent audits, regulatory records, and publicly available information, and are without factual basis.

50. GPR published its false statements with actual malice — that is, with knowledge of their falsity, or with reckless disregard for their truth or falsity. As set forth in Paragraphs 40 through 43 above, GPR was motivated by an overwhelming financial interest in its short position in RDGM common stock, failed to undertake adequate investigation of its allegations, failed to contact RGC or its auditors before publish

51. GPR's false statements were specifically directed at RGC's business, operations, financial reporting, and regulatory compliance, and were calculated to harm RGC's business interests by undermining investor confidence, impairing RGC's relationships with regulators and business partners, and causing a decline in the market price of RDGM common stock. GPR's statements were of and concerning RGC and were understood b

52. As a direct and proximate result of GPR's trade libel, RGC has suffered special damages, including but not limited to: (a) the decline in the market capitalization of RDGM common stock, resulting in a loss of approximately $573 million following the publication of the First Report alone; (b) out-of-pocket costs for crisis communications, internal investigation, forensic auditing, and regulatory response incurred

53. By reason of the foregoing, RGC is entitled to compensatory damages in an amount to be proven at trial; special damages in an amount to be proven at trial; disgorgement of GPR's short-sale profits obtained as a result of its false publications; punitive and exemplary damages in an amount sufficient to punish GPR and deter similar conduct; and preliminary and permanent injunctive relief requiring the removal of GP

54. Plaintiff Redstone Gaming Corp. incorporates by reference each and every allegation set forth in Paragraphs 1 through 53 above as though fully set forth herein.

55. At the time of GPR's wrongful conduct, RGC had existing and prospective economic relationships with a wide range of third parties, including but not limited to: institutional and retail investors in RDGM common stock; securities analysts who followed RDGM; existing and potential customers of RGC's casino-resort properties, electronic gaming platforms, and Redstone Digital iGaming products; gaming regulators in Ne