1033-00006 · Redstone Gaming Corp · Pre-Litigation & Case Opening

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PRIVILEGED AND CONFIDENTIAL ATTORNEY-CLIENT COMMUNICATION ATTORNEY WORK PRODUCT — PREPARED IN ANTICIPATION OF LITIGATION

CALDERWOOD & HARKNESS LLP 333 South Grand Avenue, Suite 4800 Los Angeles, California 90071

February 8, 2024

MEMORANDUM

TO: Derek Olafson, General Counsel, Redstone Gaming Corp.

FROM: Francesca Morano, Partner, Calderwood & Harkness LLP

RE: Preliminary Case Assessment — Redstone Gaming Corp. v. Grizzly Peak Research LLC; Superior Court of California, County of Los Angeles, Case No. 24STCV-01892

CLIENT: Redstone Gaming Corp., 8800 Crimson Ridge Parkway, Suite 1200, Las Vegas, NV 89113

I. EXECUTIVE SUMMARY

This memorandum provides Redstone Gaming Corp. ("RGC" or the "Company") with a preliminary assessment of the claims arising from the publication by Grizzly Peak Research LLC ("GPR") of a report titled "House of Cards: Redstone Gaming's Manufactured Earnings" ("Report 1"), published on February 7, 2024. The purpose of this assessment is to evaluate the strength and viability of the causes of action asserted in the complaint filed by RGC on February 5, 2024, in the Superior Court of California, County of Los Angeles, designated Case No. 24STCV-01892, and to recommend a litigation posture and set of immediate action items for the Company's consideration.

RGC's complaint was filed on February 5, 2024, based on pre-publication knowledge of Report 1 obtained through its circulation in draft form among certain financial-media contacts and market participants prior to formal publication. By the time Report 1 was publicly released on February 7, 2024, the complaint was already on file. Report 1 itself is an approximately 48-page publication in which GPR alleges that RGC fabricated approximately $410 million in fiscal year 2023 revenue through fictitious intercompany transactions. The report was published on GPR's website, grizzlypeakresearch.com, and was simultaneously distributed via GPR's social media account, @GrizzlyPeakRes, which has approximately 142,000 followers. Financial media outlets widely redistributed the report's core allegations, amplifying their reach substantially.

The immediate market impact of Report 1 was severe. RDGM stock declined from a closing price of $92.14 on February 6, 2024, to a closing price of $84.37 on February 7, 2024 — a single-day decline of $7.77 per share, or approximately 8.4%. Based on the Company's approximately 73.8 million shares outstanding, this single-day decline represents approximately $573 million in market-capitalization loss against a pre-publication market capitalization of approximately $6.8 billion. GPR disclosed a short position in RDGM in its standard disclaimer appended to Report 1, confirming that GPR and its affiliates stood to profit directly from the very stock-price decline their publication was designed to produce.

Based on our preliminary assessment, we believe RGC has strong claims for trade libel under California Civil Code § 46(3), intentional interference with prospective economic advantage, and unfair business practices under California Business and Professions Code § 17200. While the risk of an anti-SLAPP motion under California Code of Civil Procedure § 425.16 is present and must be taken seriously, we assess that risk as manageable given GPR's commercial motive and the strength of RGC's rebuttal evidence, including clean audit opinions from Pinnacle Audit & Advisory LLP covering fiscal years 2021 through 2023.

We recommend an aggressive litigation posture, early retention of a damages expert to conduct event-study analysis, immediate coordination with the Company's auditor, proactive engagement with gaming regulatory counsel, and preparation for the anti-SLAPP motion GPR is almost certain to file. We also note that intelligence suggests additional GPR reports may follow — potentially targeting RGC's random-number-generator software and related-party transactions — and the situation accordingly remains fluid and evolving. Calderwood & Harkness is actively monitoring all developments.

II. BACKGROUND

A. The Parties

1. Redstone Gaming Corp.

Redstone Gaming Corp. is a Nevada corporation publicly traded on the Nasdaq Stock Market under the ticker symbol RDGM. The Company is headquartered at 8800 Crimson Ridge Parkway, Suite 1200, Las Vegas, Nevada 89113. RGC owns and operates eleven casino-resort properties across three states — Nevada, New Jersey, and Mississippi — and is a significant participant in the regulated gaming industry in each of those jurisdictions.

In addition to its physical casino-resort operations, RGC licenses proprietary electronic gaming platforms to third-party operators, operates an iGaming division branded as Redstone Digital, and maintains a media-entertainment production arm known as Crimson Studios. The Company's operations are diversified across brick-and-mortar gaming, digital gaming, and entertainment content, and it serves a broad base of retail consumers, institutional partners, and regulated gaming counterparties.

For fiscal year 2023, RGC reported consolidated revenue of approximately $3.42 billion and EBITDA of approximately $812 million, reflecting an EBITDA margin of approximately 23.7%. These financial results were audited by Pinnacle Audit & Advisory LLP, which issued a clean (unqualified) opinion. Prior to the publication of Report 1, RGC's market capitalization was approximately $6.8 billion, and its stock traded at approximately $92.14 per share on a fully diluted basis.

Key personnel relevant to this matter include: Marcus J. Calloway, Chief Executive Officer; Priya Ramaswaran, Chief Financial Officer; Janelle Hu, Vice President of Investor Relations; and Derek Olafson, General Counsel.

2. Grizzly Peak Research LLC

Grizzly Peak Research LLC is a Delaware limited liability company with its principal office at 44 Maiden Lane, 7th Floor, San Francisco, California 94108. GPR publishes short-seller research reports — that is, reports designed to identify purported weaknesses, accounting irregularities, or fraud at publicly traded companies in which GPR and its affiliates hold short positions. GPR distributes its reports through a subscription website at grizzlypeakresearch.com and through its social media account, @GrizzlyPeakRes, which has approximately 142,000 followers.

GPR's Managing Member is Tobias "Toby" Fenchurch. The Senior Analyst and co-author of Report 1 is Ava Lin. GPR's principals maintain short positions in the companies they target, and GPR's standard disclaimer acknowledges this financial interest. GPR is not registered as an investment adviser or broker-dealer, and it does not hold itself out as providing investment advice, though its reports plainly function as bearish investment commentary designed to move stock prices downward.

3. Grizzly Peak Capital Partners LP

Grizzly Peak Capital Partners LP ("GPCP") is a Delaware limited partnership and an affiliated hedge fund of GPR with estimated assets under management of approximately $185 million. GPCP's general partner is Grizzly Peak Capital GP LLC, whose sole managing member is Tobias Fenchurch. GPCP is the entity that held the short position in RDGM at the time of Report 1's publication. As discussed further in Section III.D below, we recommend that RGC consider adding GPCP and Fenchurch individually as defendants in a potential amended complaint, particularly as additional evidence is developed regarding the coordination between GPR's research activities and GPCP's trading activity.

B. The Publication

Report 1, titled "House of Cards: Redstone Gaming's Manufactured Earnings," was published on February 7, 2024. The report is approximately 48 pages in length and presents GPR's central allegation: that RGC fabricated approximately $410 million in fiscal year 2023 revenue through fictitious intercompany transactions. The report purports to rely on a combination of publicly available financial data, former-employee accounts (whose identities are not disclosed), and GPR's own proprietary analysis.

Report 1 was published on GPR's website, grizzlypeakresearch.com, and was simultaneously distributed via GPR's social media account, @GrizzlyPeakRes, to its approximately 142,000 followers. The report was further redistributed by major financial media outlets, including Westmark Services Inc., Calderon Health IT, and Halcyon Holdings, as well as by individual market commentators and financial-analysis platforms, dramatically amplifying its reach beyond GPR's direct audience.

GPR included its standard disclaimer in Report 1, which states, among other things, that GPR and its affiliates hold short positions in the securities of the company that is the subject of the report and stand to profit if the price of those securities declines. At the time of publication, GPR's affiliated fund, GPCP, held a short position in RDGM of approximately 680,000 shares. At the pre-publication closing price of $92.14 per share, the notional value of this short position was approximately $62.66 million.

Our intelligence — based on market chatter, social-media monitoring, and informal communications from financial-media contacts — suggests that GPR intends to publish additional reports targeting RGC. We anticipate that a second report ("Report 2") may target RGC's random-number-generator ("RNG") software used in its electronic gaming platforms, and a third report ("Report 3") may target certain related-party transactions. We are monitoring GPR's website and social media accounts on a daily basis and will notify you immediately if additional publications appear.

C. Immediate Market Impact

The market impact of Report 1 was swift and severe:

• Pre-publication closing price (February 6, 2024): $92.14 per share

• Post-Report-1 closing price (February 7, 2024): $84.37 per share

• Single-day decline: $7.77 per share, representing an approximately 8.4% drop

• Shares outstanding: 73.8 million

• Approximate single-day market-capitalization loss: $7.77 × 73,800,000 ≈ $573 million

• Pre-publication market capitalization: approximately $6.8 billion

Trading volume in RDGM on February 7 was significantly elevated above the stock's 90-day average daily volume, reflecting the intensity of market reaction. Financial media coverage was extensive, with Report 1's allegations featured prominently in market-moving news feeds and analyst commentary throughout the trading day.

VP of Investor Relations Janelle Hu reports that shareholder inquiries have been sharply elevated since the report's publication, with institutional investors, sell-side analysts, and retail shareholders seeking clarification regarding the allegations. In response to the developing situation, RGC has retained Crestline Equity Partners Group Inc., under the direction of Simone Arecchi, to provide crisis-communications support and to assist in the preparation of public-facing statements.

D. RGC's Financial Position and Rebuttal Evidence

RGC's fiscal year 2023 consolidated financial statements were audited by Pinnacle Audit & Advisory LLP, a nationally recognized independent accounting firm. The engagement partner for the Pinnacle audit is Walter Ng, CPA. Pinnacle issued a clean (unqualified) audit opinion for each of fiscal years 2021, 2022, and 2023. The reported revenue of $3.42 billion and EBITDA of $812 million for fiscal year 2023 are fully supported by these audited financial statements.

GPR's central allegation — that RGC fabricated approximately $410 million in revenue through fictitious intercompany transactions — directly contradicts the conclusions reached by Pinnacle in its audit. An independent auditor's clean opinion represents a professional judgment that the financial statements present fairly, in all material respects, the financial position and results of operations of the entity in conformity with generally accepted accounting principles. An allegation of $410 million in fabricated revenue, if true, would represent a material misstatement of approximately 12% of total reported revenue — a magnitude that standard audit procedures are specifically designed to detect.

We recommend immediate engagement with Pinnacle to prepare a supplemental confirmatory analysis addressing, point by point, the specific allegations raised in Report 1. In addition, we note that RGC's operations are subject to extensive regulatory oversight by the Nevada Gaming Control Board, the New Jersey Division of Gaming Enforcement, and the Mississippi Gaming Commission. Gaming companies operating in these jurisdictions are subject to regular audits, financial reviews, and compliance examinations by gaming regulators. Allegations of the kind made by GPR — involving the fabrication of hundreds of millions of dollars in revenue through fictitious transactions — would be detectable through standard regulatory oversight mechanisms, and the absence of any prior regulatory inquiry or adverse finding is itself probative of the falsity of GPR's allegations.

III. ANALYSIS OF CLAIMS

A. Trade Libel (Cal. Civ. Code § 46(3))

1. Elements of the Claim

Under California law, a claim for trade libel (also referred to as injurious falsehood or disparagement of a business) requires the plaintiff to establish: (1) a publication of a false statement of fact; (2) that is disparaging to the plaintiff's business, products, or services; (3) publication of the statement to one or more third parties; (4) that the defendant published the statement with the requisite degree of fault — which, because RGC is a publicly traded company and likely qualifies as a public figure for purposes of this litigation, requires a showing of actual malice, i.e., knowledge that the statement was false or reckless disregard for its truth or falsity; and (5) special damages in the form of pecuniary loss. See Leonardini v. Shell Oil Co., 216 Cal. App. 3d 547 (1989); ComputerXpress, Inc. v. Jackson, 93 Cal. App. 4th 993 (2001).

2. Application to the Facts

Falsity. Report 1 alleges that RGC fabricated approximately $410 million in fiscal year 2023 revenue through fictitious intercompany transactions. This allegation is directly contradicted by Pinnacle Audit & Advisory LLP's clean audit opinions for fiscal years 2021 through 2023. Pinnacle's engagement partner, Walter Ng, CPA, conducted the audit in accordance with generally accepted auditing standards, and the resulting unqualified opinion represents a professional conclusion that RGC's financial statements are free from material misstatement. We anticipate marshaling comprehensive audit evidence — including work papers, confirmations, and testing documentation — to demonstrate the falsity of GPR's central allegation. Additionally, we may seek to obtain confirmatory statements from one or more of the gaming regulatory bodies that oversee RGC's operations, as the absence of any regulatory inquiry or adverse finding is independently probative of the falsity of the allegations.

Disparagement. The accusation that a publicly traded gaming company fabricated $410 million in revenue through fictitious transactions is inherently and profoundly disparaging to the company's business reputation. Such an allegation strikes at the heart of RGC's credibility in the capital markets, its relationships with institutional investors and lending counterparties, its standing with gaming regulators upon whose continued approval RGC depends for the maintenance of its gaming licenses, and the confidence of its customers and business partners. The disparaging nature of the publication is self-evident and will not be a contested element.

Publication to Third Parties. Report 1 was published on GPR's website and distributed simultaneously to approximately 142,000 social media followers. The report was further redistributed by Westmark Services Inc., Calderon Health IT, Halcyon Holdings, and numerous other financial media outlets and online platforms. The publication element is indisputably satisfied, and the breadth of distribution will be relevant to the damages analysis.

Actual Malice. Because RGC is a publicly traded company with significant public visibility in the gaming industry, we anticipate that GPR will argue — and the court may agree — that RGC is a public figure for purposes of this litigation. Accordingly, we must be prepared to satisfy the actual-malice standard articulated in New York Times Co. v. Sullivan, 376 U.S. 254 (1964), and its progeny. Under this standard, RGC must demonstrate by clear and convincing evidence that GPR published the false statements with knowledge that they were false or with reckless disregard for their truth or falsity.

We believe the evidence will support a finding of actual malice based on the following circumstances:

(a) Financial motive. GPR and its affiliated fund, GPCP, held a short position of approximately 680,000 shares in RDGM at the time of publication, with a notional value of approximately $62.66 million at the pre-publication closing price. GPR stood to profit — and in fact did profit — from the stock-price decline that its publication caused. This financial motive provides powerful circumstantial evidence that GPR was motivated not by a genuine interest in informing the public, but by a desire to drive down RGC's stock price for its own financial benefit. While financial motive alone does not establish actual malice, it is a significant circumstantial factor that California courts have recognized as relevant. See Reader's Digest Ass'n v. Superior Court, 37 Cal. 3d 244 (1984).

(b) Failure to seek comment. GPR did not contact RGC, its auditor Pinnacle, or any gaming regulator prior to publishing Report 1. The failure to contact the subject of an allegation of fraud — particularly when the subject is a publicly traded company with an established investor-relations function — is indicative of reckless disregard for the truth. A publisher genuinely concerned with the accuracy of its assertions would, at minimum, have sought comment from the Company or its auditor before making allegations of this magnitude.

(c) Contradiction of professional audit conclusions. GPR's allegation that RGC fabricated $410 million in revenue directly contradicts the professional conclusions of an independent accounting firm that conducted an audit in accordance with generally accepted auditing standards. GPR offers no credible explanation for why its analysis should be credited over Pinnacle's audit. The willingness to publish allegations that are flatly inconsistent with independent audit conclusions, without seeking to verify those allegations or to confront the auditor's findings, supports an inference of reckless disregard.

(d) Self-serving disclosure. GPR's own standard disclaimer acknowledges its short position and its financial interest in a decline in RDGM's stock price. This self-serving disclosure confirms the commercial nature of GPR's motivation and underscores the inference that the publication was driven by profit rather than by genuine concern for market integrity.

Special Damages. California law requires a showing of special damages — i.e., pecuniary loss — in a trade libel action. See Guess, Inc. v. Superior Court, 176 Cal. App. 3d 473 (1986). Here, the special-damages requirement is clearly satisfied. RGC suffered an approximately $573 million single-day decline in market capitalization directly attributable to Report 1. In addition, RGC is incurring out-of-pocket costs related to crisis communications (Crestline Equity Partners Group Inc.), anticipated forensic audit expenses (supplemental engagement with Pinnacle), and regulatory-response costs. These damages are concrete, quantifiable, and ongoing.

3. Assessment. The trade libel claim is RGC's strongest cause of action and the primary vehicle for recovery. The combination of audited financial statements contradicting GPR's allegations, GPR's significant short position and profit motive, GPR's failure to contact RGC or its auditor before publication, and the magnitude of the resulting financial harm presents a compelling case for liability and substantial damages. We assess this claim as strong.

B. Intentional Interference with Prospective Economic Advantage

1. Elements of the Claim

Under California law, a claim for intentional interference with prospective economic advantage requires the plaintiff to establish: (1) the existence of an economic relationship between the plaintiff and a third party, with the probability of future economic benefit to the plaintiff; (2) the defendant's knowledge of this relationship; (3) intentional acts by the defendant designed to disrupt the relationship; (4) actual disruption of the relationship; and (5) damages. See Glenrock Corporation, 29 Cal. 4th 1134 (2003). The interference must be independently wrongful — i.e., the defendant must have engaged in conduct that is independently actionable apart from the interference itself. Id.

2. Application to the Facts

Economic relationships. RGC maintains extensive and ongoing economic relationships with a wide range of third parties, including institutional investors, retail shareholders, sell-side analysts, lending counterparties, gaming regulators (whose continued approval is necessary for the maintenance of RGC's gaming licenses), business partners, content-distribution partners, and casino customers. These relationships carry a probability of significant future economic benefit to RGC, including continued investment in RDGM stock, favorable financing terms, gaming-license renewals, and ongoing business revenue.

Defendant's knowledge. GPR was aware of these relationships. Indeed, GPR's report was specifically targeted at RGC's investor base. The report's distribution strategy — simultaneous publication on a financial-research website and social media platform with 142,000 followers, timed to coincide with the trading day — was designed to reach the very investors, analysts, and market participants with whom RGC maintains economic relationships.

Intentional acts designed to disrupt. The publication of Report 1 — alleging that RGC fabricated $410 million in revenue through fictitious transactions — was an intentional act designed to disrupt RGC's relationships with its investors and the broader financial community. The publication was calculated to destroy investor confidence, drive down the stock price, and cause institutional investors and analysts to reassess their positions in RDGM — all of which GPR intended because it stood to profit from the resulting stock-price decline through its short position.

Actual disruption. Report 1 in fact disrupted RGC's economic relationships. The stock declined 8.4% in a single day, reflecting a loss of approximately $573 million in market capitalization. Shareholder inquiries have been sharply elevated. Institutional investors are reevaluating their positions. Ongoing business negotiations may be adversely affected, and the specter of gaming-license complications — while speculative at this stage — cannot be ruled out if the allegations gain traction with regulators.

Damages. The damages arising from this claim overlap substantially with those arising from the trade libel claim and are discussed in detail in Section V below.

Independent wrongfulness. The independently wrongful conduct requirement is satisfied by the trade libel claim itself. GPR's publication of false statements of fact with actual malice constitutes conduct that is independently actionable apart from the interference.

3. Assessment. The intentional-interference claim is viable and complements the trade libel cause of action. It provides an additional theory of liability and may be particularly useful in capturing categories of harm — such as disruption of business negotiations and damage to regulatory relationships — that are not neatly captured by the trade libel claim alone.

C. Unfair Business Practices (Cal. Bus. & Prof. Code § 17200)

1. Elements of the Claim

California Business and Professions Code § 17200 prohibits any "unlawful, unfair, or fraudulent business act or practice." The statute provides for injunctive relief and restitution (including disgorgement of ill-gotten gains) and operates as a broad, flexible remedy designed to capture business conduct that falls outside the reach of more specific statutory prohibitions.

2. Application to the Facts

GPR's publication of materially false reports while holding a large short position and profiting from the resulting stock-price decline constitutes an unfair business practice within the meaning of § 17200 under each of the statute's three prongs:

(a) Unlawful prong. GPR's conduct is "unlawful" insofar as it constitutes trade libel actionable under California Civil Code § 46(3). The unlawful prong of § 17200 borrows from other laws and treats violations of those laws as independently actionable unfair business practices.

(b) Unfair prong. GPR's scheme — publishing false fraud allegations about a public company while holding a significant short position in that company's stock, thereby profiting from the stock-price decline caused by its own false publications — constitutes conduct whose harm to victims substantially outweighs any legitimate utility. Under the "tethering" test applied in Cel-Tech Communications, Inc. v. Los Angeles Cellular Telephone Co., 20 Cal. 4th 163 (1999), conduct is "unfair" if it threatens an incipient violation of an antitrust law, violates the policy or spirit of such laws, or involves conduct whose harm to victims outweighs its utility. GPR's scheme plainly satisfies this standard.

(c) Fraudulent prong. GPR's report is "fraudulent" in the sense that it is likely to deceive reasonable members of the investing public. The report presents itself as rigorous financial analysis while omitting the critical context that GPR's own financial interest in a stock-price decline creates a profound conflict of interest that colors every aspect of its analysis. While GPR includes a disclaimer disclosing its short position, the disclaimer is buried at the end of the report and does not adequately convey the magnitude of GPR's financial incentive to present a misleading picture of RGC's financial condition.

Remedies. The § 17200 claim is particularly valuable because of the remedies it makes available. Injunctive relief could include an order prohibiting GPR from publishing further false or misleading reports about RGC. Restitution could include disgorgement of GPR's short-sale profits. Based on GPR's 680,000-share short position and the $7.77 per-share decline following Report 1, GPR's unrealized gain on this position is approximately $5.28 million as of the close of trading on February 7, 2024. If GPR closes its position at even lower prices — particularly if additional reports drive further declines — the profit could be significantly greater. Disgorgement of these profits would serve both compensatory and deterrent purposes.

3. Assessment. The § 17200 claim is viable and provides remedies — particularly injunctive relief and disgorgement — that are not available through the trade libel and interference claims alone. It adds meaningful strategic value to the overall litigation.

D. Potential Additional Claims (for Amended Complaint)

As the litigation develops and additional evidence emerges — particularly if GPR publishes additional reports — we recommend considering the following additions to the pleadings through a First Amended Complaint:

Negligent Misrepresentation. If additional reports demonstrate a pattern of careless or inadequate research by GPR, a negligent misrepresentation claim may become viable. Such a claim would not require proof of actual malice, but would require a showing that GPR owed a duty of care in its publications, breached that duty by failing to conduct adequate investigation, and caused pecuniary loss to RGC as a result. This claim is not asserted in the current complaint but should be reassessed as the factual record develops.

Adding Defendants. We recommend that RGC consider adding Grizzly Peak Capital Partners LP — the entity that actually held the short position in RDGM — as a defendant. GPCP's direct financial interest in the stock-price decline caused by Report 1, combined with Tobias Fenchurch's role as sole managing member of both GPR and GPCP's general partner, supports piercing the organizational separation between the research entity and the trading entity. Additionally, we recommend considering adding Fenchurch individually as a defendant if evidence supports that he personally directed the publication of Report 1 with knowledge of its falsity or with reckless disregard for the truth. These additions would strengthen the litigation and expand the pool of assets available to satisfy a judgment.

IV. ANTI-SLAPP RISK ASSESSMENT

A. Overview of Cal. Code Civ. Proc. § 425.16

California's anti-SLAPP statute, codified at Code of Civil Procedure § 425.16, provides a mechanism for the early dismissal of claims that arise from a defendant's exercise of the constitutional rights of free speech or petition in connection with a public issue. The statute was enacted to protect defendants from meritless lawsuits designed to chill the exercise of First Amendment rights, and it provides for an expedited motion process and mandatory recovery of attorney's fees by a prevailing defendant.

The anti-SLAPP analysis proceeds in two prongs:

Prong One — Protected Activity. The defendant bears the initial burden of demonstrating that the challenged claims arise from an act taken in furtherance of the defendant's right of free speech or petition in connection with a public issue or an issue of public interest.

Prong Two — Probability of Prevailing. If the defendant satisfies prong one, the burden shifts to the plaintiff to demonstrate a probability of prevailing on the merits of the challenged claims. This is not a full merits determination, but requires the plaintiff to present a prima facie showing — i.e., evidence sufficient to sustain a favorable judgment if credited by the trier of fact.

If the anti-SLAPP motion is granted, the plaintiff's claims are stricken, and the defendant is entitled to an award of attorney's fees and costs. If the motion is denied, discovery proceeds and the case continues on the normal track. An anti-SLAPP motion must be filed within 60 days of service of the complaint, though the court may grant extensions for good cause. We anticipate that GPR will file an anti-SLAPP motion, likely in April 2024 following service.

B. Prong One — Protected Activity

GPR will argue — and we should expect this argument to receive serious consideration by the court — that its research reports constitute speech on a matter of public interest. Specifically, GPR will contend that the financial condition and accounting practices of a publicly traded company worth $6.8 billion, operating in the heavily regulated gaming industry, are matters of legitimate public concern, and that GPR's reports constitute constitutionally protected commentary on those matters.

There is some force to this argument. California courts have broadly construed the concept of "public interest" under the anti-SLAPP statute, and it is difficult to argue that the financial integrity of a major public company is not a matter of public concern.

However, RGC has a strong counter-argument: the commercial-speech exception. Under California law, the anti-SLAPP statute does not apply to speech that arises from commercial transactions, including statements made in the course of commercial conduct for the purpose of obtaining a competitive advantage. See Veltason Strong-Tie Co. v. Gore, 49 Cal. 4th 12 (2010). GPR did not publish Report 1 for the purpose of informing public discourse or advancing a matter of genuine public concern. GPR published Report 1 for the purpose of driving down the price of RDGM stock so that GPR and its affiliated hedge fund, GPCP, could profit from their 680,000-share short position. This is commercial speech, motivated by a direct and substantial financial interest in the outcome of the speech.

The fact that GPR disclosed its short position in its standard disclaimer does not immunize the speech from the commercial-speech exception; to the contrary, the disclosure underscores the commercial nature of the speech. GPR is not a disinterested whistleblower or a public-interest organization. It is a profit-driven entity that publishes reports for the purpose of moving stock prices in a direction that benefits its own portfolio.

We anticipate that the court's analysis of prong one will be closely contested, and we should prepare a robust opposition brief on this issue. However, we believe we have strong arguments that GPR's conduct falls within the commercial-speech exception and that the anti-SLAPP statute should not shield GPR from liability.

C. Prong Two — Probability of Prevailing

Even if GPR clears prong one — i.e., even if the court concludes that GPR's reports constitute protected activity under the anti-SLAPP statute — RGC must merely demonstrate a probability of prevailing on its claims. This is a relatively low bar. The plaintiff is not required to prove its case at this stage; it need only make a prima facie showing that its claims have sufficient merit to warrant proceeding to trial.

We are confident that RGC can satisfy this burden based on the following evidence:

(a) Evidence of falsity. Pinnacle Audit & Advisory LLP's clean audit opinions for fiscal years 2021 through 2023 directly contradict GPR's allegation that RGC fabricated $410 million in revenue. This evidence is powerful and will be central to our showing at the anti-SLAPP stage.

(b) Evidence of actual malice. GPR's 680,000-share short position and resulting profit motive provide compelling circumstantial evidence of actual malice. GPR's failure to contact RGC, Pinnacle, or any gaming regulator before publishing Report 1 further supports an inference of reckless disregard for the truth. The clean audit opinions, which GPR either ignored or chose to disregard, provide additional evidence that GPR published its allegations without adequate basis.

(c) Evidence of damages. The $573 million single-day decline in market capitalization is documented and quantifiable. Crisis-communications costs are accruing through the Ashgrove Equity Partners engagement. Additional damages categories are developing.

D. Strategic Recommendation

Based on our assessment, we conclude that the anti-SLAPP risk is manageable and should not deter RGC from pursuing aggressive litigation. We recommend the following preparatory steps:

1. Begin assembling declarations and evidence for the anti-SLAPP opposition immediately, well in advance of GPR's anticipated motion.

2. Obtain a declaration from Walter Ng, CPA, the engagement partner at Pinnacle Audit & Advisory LLP, confirming the clean audit opinions for fiscal years 2021 through 2023 and describing the scope and rigor of Pinnacle's audit procedures.

3. Obtain a declaration from CFO Priya Ramaswaran directly rebutting the revenue-fabrication allegation, explaining the nature and legitimacy of the intercompany transactions identified by GPR, and confirming the accuracy of RGC's reported financial results.

4. Obtain a declaration from Janelle Hu, VP of Investor Relations, documenting the market impact of Report 1, including the stock-price decline, elevated shareholder inquiries, and disruption to investor-relations activities.

5. Prepare a comprehensive legal brief addressing both prongs of the anti-SLAPP analysis, with particular emphasis on the commercial-speech exception.

If the anti-SLAPP motion is denied, it will constitute a significant strategic victory for RGC. A denial at this stage would confirm the viability of RGC's claims, open the door to full discovery — including discovery into GPR's trading activity, communications, and research methodology — and substantially strengthen RGC's leverage for all remaining phases of litigation, including any potential settlement negotiations.

V. DAMAGES ASSESSMENT AND EXPERT ENGAGEMENT

A. Preliminary Damages Framework

RGC's damages from Report 1 are substantial and continue to develop. We organize the preliminary damages framework as follows:

Market-Capitalization Loss. The single-day decline in RGC's market capitalization following Report 1 was approximately $573 million. This figure represents the aggregate loss experienced by RGC's shareholders as a result of the stock-price decline from $92.14 to $84.37 per share on February 7, 2024. If GPR publishes additional reports — as our intelligence suggests — and those reports cause further declines, the cumulative market-capitalization loss could be significantly greater.

It is important to note that the $573 million figure represents the gross market-capitalization decline, not the net damages attributable to GPR's false statements. An econometric event study will be necessary to isolate the portion of the stock decline attributable to GPR's false statements as distinguished from general market movements, sector-specific trends, and other confounding factors. Event-study methodology is the standard analytical framework in securities-related damages quantification, and it will be essential to our damages case at trial.

Out-of-Pocket Costs (Accruing). RGC is incurring, and will continue to incur, significant out-of-pocket costs as a direct result of GPR's publication:

• Crisis communications and public relations: RGC has retained Crestline Equity Partners Group Inc., under the direction of Simone Arecchi, to manage crisis communications and assist in the preparation of public-facing statements. These costs are ongoing and are expected to continue for the duration of the public controversy surrounding Report 1.

• Forensic audit and supplemental engagement: We anticipate that RGC will need to retain Pinnacle Audit & Advisory LLP for a supplemental forensic audit engagement designed to address, on a line-by-line basis, the specific allegations raised in Report 1. This engagement will generate significant professional fees.

• Regulatory-response costs: If GPR's publications trigger inquiries from the Nevada Gaming Control Board, the SEC, or other regulatory bodies, RGC will incur costs in responding to those inquiries, including the potential engagement of specialized Nevada gaming regulatory counsel.

• Litigation costs: The costs of this litigation itself — attorney's fees, expert fees, court costs, and related expenses — are being incurred as a direct consequence of GPR's conduct.

GPR's Short-Sale Profits. GPR's profit from its short position is a key data point for both compensatory damages and punitive-damage arguments. At the time of publication, GPCP held a short position of approximately 680,000 shares. The pre-publication closing price was $92.14; the post-publication closing price was $84.37. If the position remained open as of the close on February 7, the unrealized gain on the short position was approximately:

680,000 shares × $7.77 per share = $5,283,600

This figure represents an unrealized gain as of the close on February 7 and assumes the position has not yet been closed. If the stock declines further — particularly as a result of additional GPR reports — and the position is closed at lower prices, GPR's realized profit will increase substantially. Tracking GPR's trading activity will be an important component of discovery.

Disgorgement. Under the § 17200 UCL claim, disgorgement of GPR's short-sale profits may be available as a form of restitution. Disgorgement serves both compensatory and deterrent functions and would ensure that GPR does not retain the financial benefit of its wrongful conduct.

B. Recommendation: Early Expert Retention

We strongly recommend the early retention of a damages expert specializing in financial economics and event-study methodology. Early retention is critical for several reasons: (1) it will allow the expert to capture and preserve real-time market data as events unfold, including trading data on the day of publication and in the days following; (2) it will enable the expert to establish a clean analytical framework before the factual record becomes more complex (particularly if additional reports are published); and (3) it will position us to present a rigorous and well-supported damages analysis at the anti-SLAPP stage, if necessary.

We recommend retaining Dr. Elena Vostrikova at Meridian Forensic Economics LLC, 1901 Avenue of the Stars, Suite 900, Los Angeles, California 90067. Dr. Vostrikova is an experienced financial economist who has served as a testifying expert in numerous securities-related damages cases in both state and federal courts. She has extensive experience in event-study methodology, trade-libel damages quantification, and the analysis of market microstructure. Her credentials and testimony record are strong, and she is well-suited to the demands of this engagement.

We recommend that a formal retention letter be sent to Dr. Vostrikova as soon as possible — ideally within the next 48 hours — to secure her availability and to begin the process of data collection and preliminary analysis.

VI. IMMEDIATE ACTION ITEMS AND RECOMMENDATIONS

A. Litigation Posture

We recommend an aggressive litigation posture. The strength of RGC's evidence — including clean audited financial statements from an independent accounting firm, extensive regulatory oversight by multiple gaming commissions, and the absence of any prior regulatory inquiry or adverse finding — combined with GPR's financial motive in the form of a 680,000-share short position with approximately $62.66 million in notional exposure, supports vigorous prosecution of the claims asserted in the complaint.

The complaint was filed on February 5, 2024, in the Superior Court of California, County of Los Angeles, and has been assigned Case No. 24STCV-01892. Service must be effected on GPR at its principal office at 44 Maiden Lane, 7th Floor, San Francisco, California 94108, and on its registered agent, Pacific Corporate Services LLC, at 1209 Orange Street, Wilmington, Delaware 19801. We are coordinating service through a process-service company and expect service to be effected within the next ten business days.

B. Monitoring for Additional Reports

As noted above, our intelligence suggests that GPR intends to publish additional reports targeting RGC. We recommend the following monitoring and contingency measures:

1. Monitor grizzlypeakresearch.com and the @GrizzlyPeakRes social media account on a daily basis for new publications or previews of forthcoming reports.

2. If additional reports are published, assess whether the content and circumstances warrant seeking emergency injunctive relief, including a temporary restraining order ("TRO") and/or a preliminary injunction. The threshold for such relief is high — particularly given First Amendment considerations — but may be met if additional reports demonstrate a pattern of deliberately false publications designed to manipulate the market for GPR's financial benefit.

3. If additional defendants should be added — including GPCP and Tobias Fenchurch individually — prepare a First Amended Complaint promptly. We recommend having a draft First Amended Complaint substantially prepared in advance so that it can be filed on short notice if circumstances warrant.

C. Regulatory Coordination

The publication of Report 1 may trigger inquiries from one or more regulatory bodies, including the Nevada Gaming Control Board, the New Jersey Division of Gaming Enforcement, the Mississippi Gaming Commission, or the U.S. Securities and Exchange Commission. We recommend the following steps:

1. Coordinate with RGC management to identify and respond promptly to any inquiries from gaming regulators or the SEC triggered by GPR's publications.

2. Consider proactive engagement with specialized Nevada gaming regulatory counsel. We recommend Hargrove & Sato LLP, 300 South 4th Street, Suite 1800, Las Vegas, Nevada 89101, as experienced gaming regulatory practitioners who can assist RGC in navigating any regulatory inquiries and, where appropriate, in obtaining confirmatory statements or clearances from the Nevada Gaming Control Board.

3. Consider requesting that the Nevada Gaming Control Board conduct an independent audit of RGC's random-number-generator systems used in its electronic gaming platforms. Although this request goes beyond the specific allegations in Report 1, our intelligence suggests that GPR's anticipated Report 2 may target RGC's RNG software. A proactive, voluntary request for an independent regulatory audit would serve to preemptively rebut any future allegations regarding gaming-software integrity and would demonstrate RGC's commitment to transparency and regulatory compliance.

D. Insurance Notification

We recommend that RGC promptly notify its directors-and-officers ("D&O") liability insurer, Atlas National Insurance Group, 777 South Figueroa Street, Suite 2800, Los Angeles, California 90017, of the GPR publications and the potential claims arising therefrom. Even if no affirmative coverage claim is triggered at this time, timely notification is important to preserve RGC's coverage rights under its D&O policy. Many D&O policies contain notice provisions that require the insured to provide notice of potential claims within a specified period, and failure to comply with these provisions can result in a loss of coverage. We recommend that the notification be made in writing and that a copy be provided to this firm for our files.

E. Internal Investigation

We recommend that RGC, through its General Counsel's office, conduct a targeted internal review to confirm the integrity of all matters raised in Report 1. This review should be designed to give the litigation team complete confidence in the rebuttal evidence and to identify any issues that may require further attention before they become problems in litigation.

Specifically, we recommend the following:

1. Review the specific intercompany transactions identified by GPR in Report 1 and confirm their legitimacy, business purpose, and proper accounting treatment.

2. Coordinate with Pinnacle Audit & Advisory LLP (Walter Ng, CPA) for a supplemental forensic audit engagement focused on the matters raised in Report 1.

3. Interview relevant personnel, including finance, accounting, and operations staff, to gather information that may be useful in rebutting GPR's allegations and in preparing declarations for the anti-SLAPP opposition.

4. Ensure that the results of the internal review are communicated to the litigation team at Calderwood & Harkness on a privileged basis.

F. Expert Retention

As discussed in Section V.B above, we recommend the following expert retentions:

1. Dr. Elena Vostrikova / Meridian Forensic Economics LLC — for event-study analysis and damages quantification. A formal retention letter should be sent within 48 hours.

2. Pinnacle Audit & Advisory LLP — for a supplemental forensic audit engagement addressing the specific allegations in Report 1. This engagement should be coordinated through RGC's General Counsel's office and should be structured to maximize both its evidentiary value and its protection under the attorney-client privilege and work-product doctrine.

G. Public Communications

All public statements by RGC regarding Report 1 and its aftermath should be coordinated through Crestline Equity Partners Group Inc. (Simone Arecchi) to ensure consistent messaging and to avoid any statements that could be used against RGC in litigation.

We recommend that RGC issue a firm but measured public response to Report 1. The statement should:

• Reaffirm the integrity of RGC's financial statements and the accuracy of its reported financial results.

• Reference the clean audit opinions issued by Pinnacle Audit & Advisory LLP for fiscal years 2021 through 2023.

• Note that RGC operates under the extensive regulatory oversight of gaming commissions in three states.

• State that RGC has filed a lawsuit against GPR and intends to vigorously defend its reputation.

• Avoid detailed engagement with the specific allegations in Report 1, which could inadvertently lend credibility to GPR's claims or create discovery issues.

H. Litigation Hold

We understand that a litigation-hold memorandum was issued on February 5, 2024, by Carlos Espinoza to Derek Olafson and Janelle Hu. We recommend the following steps to ensure full compliance with preservation obligations:

1. Confirm that the litigation-hold memorandum has been disseminated to all key custodians, including Marcus J. Calloway (CEO), Priya Ramaswaran (CFO), Janelle Hu (VP, Investor Relations), and any other personnel likely to possess documents or communications relevant to the matters raised by GPR.

2. Ensure preservation of all communications — including emails, text messages, instant messages, voicemails, and other electronic records — regarding GPR, Tobias Fenchurch, Ava Lin, Report 1, and any anticipated future reports.

3. Ensure preservation of all communications regarding Vermilion Holdings LLC, an entity referenced by GPR in Report 1 that may feature prominently in future reports.

4. Confirm that any automatic-deletion policies have been suspended for all key custodians and relevant data sources.

5. Retain a copy of the litigation-hold memorandum and all distribution confirmations for the litigation file.

VII. ENGAGEMENT TEAM AND NEXT STEPS

Calderwood & Harkness's engagement team for this matter consists of the following attorneys:

The fee arrangement for this engagement is a modified hourly structure at 85% of Calderwood & Harkness's standard rates during the pendency of the litigation. In addition, a 15% success premium will be applied to aggregate fees upon the successful conclusion of the matter, whether by settlement or judgment. This arrangement reflects our confidence in the strength of RGC's claims and our commitment to achieving the best possible outcome for the Company.

Calderwood & Harkness will provide weekly written updates to Derek Olafson regarding all significant developments in the litigation. In addition, we will schedule a conference call with RGC's executive team — including Marcus J. Calloway, Priya Ramaswaran, Derek Olafson, and Janelle Hu — within the next 48 hours to discuss the strategic framework outlined in this memorandum and to address any questions or concerns.

Carlos Espinoza and Hannah Brinkley are currently preparing a detailed legal research memorandum addressing California trade libel elements, actual-malice standards applicable to public-figure plaintiffs, and the anti-SLAPP framework under Cal. Code Civ. Proc. § 425.16. We expect delivery of this memorandum on or before February 12, 2024.

VIII. CONCLUSION

Based on our preliminary assessment, Redstone Gaming Corp. has strong claims against Grizzly Peak Research LLC for trade libel, intentional interference with prospective economic advantage, and unfair business practices under California Business and Professions Code § 17200. The strength of RGC's evidence — anchored by clean audit opinions from Pinnacle Audit & Advisory LLP and buttressed by the extensive regulatory oversight to which RGC's operations are subject — combined with GPR's substantial financial motive in the form of a 680,000-share short position, positions RGC well for aggressive prosecution of these claims.

The risk of an anti-SLAPP motion is present and must be taken seriously, but we assess that risk as manageable. GPR's commercial motive and RGC's strong rebuttal evidence provide a solid foundation for defeating an anti-SLAPP motion at prong one (through the commercial-speech exception) or, failing that, at prong two (through a prima facie showing of probability of prevailing).

Our immediate priorities are as follows:

1. Effect service of the complaint on GPR and its registered agent.

2. Monitor GPR's website and social media accounts daily for additional reports.

3. Retain Dr. Elena Vostrikova at Meridian Forensic Economics LLC for event-study and damages analysis.

4. Coordinate with Pinnacle Audit & Advisory LLP (Walter Ng, CPA) for supplemental forensic audit.

5. Engage Nevada gaming regulatory counsel (Hargrove & Sato LLP) for proactive regulatory coordination.

6. Issue a measured public response through Crestline Equity Partners Group Inc. (Simone Arecchi).

7. Prepare declarations and evidence for the anticipated anti-SLAPP motion.

8. Confirm dissemination and compliance with the litigation-hold memorandum.

9. Assess the advisability of adding GPCP and Tobias Fenchurch as defendants in a First Amended Complaint.

Calderwood & Harkness is fully engaged on this matter and recommends proceeding with maximum vigor. We are available to discuss this memorandum and the recommended course of action at your earliest convenience.

Respectfully submitted,

CALDERWOOD & HARKNESS LLP

By: ________

Francesca Morano, Partner 333 South Grand Avenue, Suite 4800 Los Angeles, California 90071 Telephone: (213) 555-4800

Email: fmorano@calderwoodharkness.com

Date: February 8, 2024

Distribution:

cc: Samuel Eklund, Partner, Calderwood & Harkness LLP Carlos Espinoza, Associate, Calderwood & Harkness LLP Hannah Brinkley, Associate, Calderwood & Harkness LLP

PRIVILEGED AND CONFIDENTIAL ATTORNEY-CLIENT COMMUNICATION ATTORNEY WORK PRODUCT — PREPARED IN ANTICIPATION OF LITIGATION
CALDERWOOD & HARKNESS LLP 333 South Grand Avenue, Suite 4800 Los Angeles, California 90071
February 8, 2024
MEMORANDUM
TO: Derek Olafson, General Counsel, Redstone Gaming Corp.
FROM: Francesca Morano, Partner, Calderwood & Harkness LLP
RE: Preliminary Case Assessment — Redstone Gaming Corp. v. Grizzly Peak Research LLC; Superior Court of California, County of Los Angeles, Case No. 24STCV-01892
CLIENT: Redstone Gaming Corp., 8800 Crimson Ridge Parkway, Suite 1200, Las Vegas, NV 89113
I. EXECUTIVE SUMMARY
This memorandum provides Redstone Gaming Corp. ("RGC" or the "Company") with a preliminary assessment of the claims arising from the publication by Grizzly Peak Research LLC ("GPR") of a report titled "House of Cards: Redstone Gaming's Manufactured Earnings" ("Report 1"), published on February 7, 2024. The purpose of this assessment is to evaluate the strength and viability of the causes of action asserted in the complaint filed by RGC on February 5, 2024, in the Superior Court of California, County of Los Angeles, designated Case No. 24STCV-01892, and to recommend a litigation posture and set of immediate action items for the Company's consideration.
RGC's complaint was filed on February 5, 2024, based on pre-publication knowledge of Report 1 obtained through its circulation in draft form among certain financial-media contacts and market participants prior to formal publication. By the time Report 1 was publicly released on February 7, 2024, the complaint was already on file. Report 1 itself is an approximately 48-page publication in which GPR alleges that RGC fabricated approximately $410 million in fiscal year 2023 revenue through fictitious intercompany transactions. The report was published on GPR's website, grizzlypeakresearch.com, and was simultaneously distributed via GPR's social media account, @GrizzlyPeakRes, which has approximately 142,000 followers. Financial media outlets widely redistributed the report's core allegations, amplifying their reach substantially.
The immediate market impact of Report 1 was severe. RDGM stock declined from a closing price of $92.14 on February 6, 2024, to a closing price of $84.37 on February 7, 2024 — a single-day decline of $7.77 per share, or approximately 8.4%. Based on the Company's approximately 73.8 million shares outstanding, this single-day decline represents approximately $573 million in market-capitalization loss against a pre-publication market capitalization of approximately $6.8 billion. GPR disclosed a short position in RDGM in its standard disclaimer appended to Report 1, confirming that GPR and its affiliates stood to profit directly from the very stock-price decline their publication was designed to produce.
Based on our preliminary assessment, we believe RGC has strong claims for trade libel under California Civil Code § 46(3), intentional interference with prospective economic advantage, and unfair business practices under California Business and Professions Code § 17200. While the risk of an anti-SLAPP motion under California Code of Civil Procedure § 425.16 is present and must be taken seriously, we assess that risk as manageable given GPR's commercial motive and the strength of RGC's rebuttal evidence, including clean audit opinions from Pinnacle Audit & Advisory LLP covering fiscal years 2021 through 2023.
We recommend an aggressive litigation posture, early retention of a damages expert to conduct event-study analysis, immediate coordination with the Company's auditor, proactive engagement with gaming regulatory counsel, and preparation for the anti-SLAPP motion GPR is almost certain to file. We also note that intelligence suggests additional GPR reports may follow — potentially targeting RGC's random-number-generator software and related-party transactions — and the situation accordingly remains fluid and evolving. Calderwood & Harkness is actively monitoring all developments.
II. BACKGROUND
A. The Parties
1. Redstone Gaming Corp.
Redstone Gaming Corp. is a Nevada corporation publicly traded on the Nasdaq Stock Market under the ticker symbol RDGM. The Company is headquartered at 8800 Crimson Ridge Parkway, Suite 1200, Las Vegas, Nevada 89113. RGC owns and operates eleven casino-resort properties across three states — Nevada, New Jersey, and Mississippi — and is a significant participant in the regulated gaming industry in each of those jurisdictions.
In addition to its physical casino-resort operations, RGC licenses proprietary electronic gaming platforms to third-party operators, operates an iGaming division branded as Redstone Digital, and maintains a media-entertainment production arm known as Crimson Studios. The Company's operations are diversified across brick-and-mortar gaming, digital gaming, and entertainment content, and it serves a broad base of retail consumers, institutional partners, and regulated gaming counterparties.
For fiscal year 2023, RGC reported consolidated revenue of approximately $3.42 billion and EBITDA of approximately $812 million, reflecting an EBITDA margin of approximately 23.7%. These financial results were audited by Pinnacle Audit & Advisory LLP, which issued a clean (unqualified) opinion. Prior to the publication of Report 1, RGC's market capitalization was approximately $6.8 billion, and its stock traded at approximately $92.14 per share on a fully diluted basis.
Key personnel relevant to this matter include: Marcus J. Calloway, Chief Executive Officer; Priya Ramaswaran, Chief Financial Officer; Janelle Hu, Vice President of Investor Relations; and Derek Olafson, General Counsel.
2. Grizzly Peak Research LLC
Grizzly Peak Research LLC is a Delaware limited liability company with its principal office at 44 Maiden Lane, 7th Floor, San Francisco, California 94108. GPR publishes short-seller research reports — that is, reports designed to identify purported weaknesses, accounting irregularities, or fraud at publicly traded companies in which GPR and its affiliates hold short positions. GPR distributes its reports through a subscription website at grizzlypeakresearch.com and through its social media account, @GrizzlyPeakRes, which has approximately 142,000 followers.
GPR's Managing Member is Tobias "Toby" Fenchurch. The Senior Analyst and co-author of Report 1 is Ava Lin. GPR's principals maintain short positions in the companies they target, and GPR's standard disclaimer acknowledges this financial interest. GPR is not registered as an investment adviser or broker-dealer, and it does not hold itself out as providing investment advice, though its reports plainly function as bearish investment commentary designed to move stock prices downward.
3. Grizzly Peak Capital Partners LP
Grizzly Peak Capital Partners LP ("GPCP") is a Delaware limited partnership and an affiliated hedge fund of GPR with estimated assets under management of approximately $185 million. GPCP's general partner is Grizzly Peak Capital GP LLC, whose sole managing member is Tobias Fenchurch. GPCP is the entity that held the short position in RDGM at the time of Report 1's publication. As discussed further in Section III.D below, we recommend that RGC consider adding GPCP and Fenchurch individually as defendants in a potential amended complaint, particularly as additional evidence is developed regarding the coordination between GPR's research activities and GPCP's trading activity.
B. The Publication
Report 1, titled "House of Cards: Redstone Gaming's Manufactured Earnings," was published on February 7, 2024. The report is approximately 48 pages in length and presents GPR's central allegation: that RGC fabricated approximately $410 million in fiscal year 2023 revenue through fictitious intercompany transactions. The report purports to rely on a combination of publicly available financial data, former-employee accounts (whose identities are not disclosed), and GPR's own proprietary analysis.
Report 1 was published on GPR's website, grizzlypeakresearch.com, and was simultaneously distributed via GPR's social media account, @GrizzlyPeakRes, to its approximately 142,000 followers. The report was further redistributed by major financial media outlets, including Westmark Services Inc., Calderon Health IT, and Halcyon Holdings, as well as by individual market commentators and financial-analysis platforms, dramatically amplifying its reach beyond GPR's direct audience.
GPR included its standard disclaimer in Report 1, which states, among other things, that GPR and its affiliates hold short positions in the securities of the company that is the subject of the report and stand to profit if the price of those securities declines. At the time of publication, GPR's affiliated fund, GPCP, held a short position in RDGM of approximately 680,000 shares. At the pre-publication closing price of $92.14 per share, the notional value of this short position was approximately $62.66 million.
Our intelligence — based on market chatter, social-media monitoring, and informal communications from financial-media contacts — suggests that GPR intends to publish additional reports targeting RGC. We anticipate that a second report ("Report 2") may target RGC's random-number-generator ("RNG") software used in its electronic gaming platforms, and a third report ("Report 3") may target certain related-party transactions. We are monitoring GPR's website and social media accounts on a daily basis and will notify you immediately if additional publications appear.
C. Immediate Market Impact
The market impact of Report 1 was swift and severe:
•  Pre-publication closing price (February 6, 2024): $92.14 per share
•  Post-Report-1 closing price (February 7, 2024): $84.37 per share
•  Single-day decline: $7.77 per share, representing an approximately 8.4% drop
•  Shares outstanding: 73.8 million
•  Approximate single-day market-capitalization loss: $7.77 × 73,800,000 ≈ $573 million
•  Pre-publication market capitalization: approximately $6.8 billion
Trading volume in RDGM on February 7 was significantly elevated above the stock's 90-day average daily volume, reflecting the intensity of market reaction. Financial media coverage was extensive, with Report 1's allegations featured prominently in market-moving news feeds and analyst commentary throughout the trading day.
VP of Investor Relations Janelle Hu reports that shareholder inquiries have been sharply elevated since the report's publication, with institutional investors, sell-side analysts, and retail shareholders seeking clarification regarding the allegations. In response to the developing situation, RGC has retained Crestline Equity Partners Group Inc., under the direction of Simone Arecchi, to provide crisis-communications support and to assist in the preparation of public-facing statements.
D. RGC's Financial Position and Rebuttal Evidence
RGC's fiscal year 2023 consolidated financial statements were audited by Pinnacle Audit & Advisory LLP, a nationally recognized independent accounting firm. The engagement partner for the Pinnacle audit is Walter Ng, CPA. Pinnacle issued a clean (unqualified) audit opinion for each of fiscal years 2021, 2022, and 2023. The reported revenue of $3.42 billion and EBITDA of $812 million for fiscal year 2023 are fully supported by these audited financial statements.
GPR's central allegation — that RGC fabricated approximately $410 million in revenue through fictitious intercompany transactions — directly contradicts the conclusions reached by Pinnacle in its audit. An independent auditor's clean opinion represents a professional judgment that the financial statements present fairly, in all material respects, the financial position and results of operations of the entity in conformity with generally accepted accounting principles. An allegation of $410 million in fabricated revenue, if true, would represent a material misstatement of approximately 12% of total reported revenue — a magnitude that standard audit procedures are specifically designed to detect.
We recommend immediate engagement with Pinnacle to prepare a supplemental confirmatory analysis addressing, point by point, the specific allegations raised in Report 1. In addition, we note that RGC's operations are subject to extensive regulatory oversight by the Nevada Gaming Control Board, the New Jersey Division of Gaming Enforcement, and the Mississippi Gaming Commission. Gaming companies operating in these jurisdictions are subject to regular audits, financial reviews, and compliance examinations by gaming regulators. Allegations of the kind made by GPR — involving the fabrication of hundreds of millions of dollars in revenue through fictitious transactions — would be detectable through standard regulatory oversight mechanisms, and the absence of any prior regulatory inquiry or adverse finding is itself probative of the falsity of GPR's allegations.
III. ANALYSIS OF CLAIMS
A. Trade Libel (Cal. Civ. Code § 46(3))
1. Elements of the Claim
Under California law, a claim for trade libel (also referred to as injurious falsehood or disparagement of a business) requires the plaintiff to establish: (1) a publication of a false statement of fact; (2) that is disparaging to the plaintiff's business, products, or services; (3) publication of the statement to one or more third parties; (4) that the defendant published the statement with the requisite degree of fault — which, because RGC is a publicly traded company and likely qualifies as a public figure for purposes of this litigation, requires a showing of actual malice, i.e., knowledge that the statement was false or reckless disregard for its truth or falsity; and (5) special damages in the form of pecuniary loss. See Leonardini v. Shell Oil Co., 216 Cal. App. 3d 547 (1989); ComputerXpress, Inc. v. Jackson, 93 Cal. App. 4th 993 (2001).
2. Application to the Facts
Falsity. Report 1 alleges that RGC fabricated approximately $410 million in fiscal year 2023 revenue through fictitious intercompany transactions. This allegation is directly contradicted by Pinnacle Audit & Advisory LLP's clean audit opinions for fiscal years 2021 through 2023. Pinnacle's engagement partner, Walter Ng, CPA, conducted the audit in accordance with generally accepted auditing standards, and the resulting unqualified opinion represents a professional conclusion that RGC's financial statements are free from material misstatement. We anticipate marshaling comprehensive audit evidence — including work papers, confirmations, and testing documentation — to demonstrate the falsity of GPR's central allegation. Additionally, we may seek to obtain confirmatory statements from one or more of the gaming regulatory bodies that oversee RGC's operations, as the absence of any regulatory inquiry or adverse finding is independently probative of the falsity of the allegations.
Disparagement. The accusation that a publicly traded gaming company fabricated $410 million in revenue through fictitious transactions is inherently and profoundly disparaging to the company's business reputation. Such an allegation strikes at the heart of RGC's credibility in the capital markets, its relationships with institutional investors and lending counterparties, its standing with gaming regulators upon whose continued approval RGC depends for the maintenance of its gaming licenses, and the confidence of its customers and business partners. The disparaging nature of the publication is self-evident and will not be a contested element.
Publication to Third Parties. Report 1 was published on GPR's website and distributed simultaneously to approximately 142,000 social media followers. The report was further redistributed by Westmark Services Inc., Calderon Health IT, Halcyon Holdings, and numerous other financial media outlets and online platforms. The publication element is indisputably satisfied, and the breadth of distribution will be relevant to the damages analysis.
Actual Malice. Because RGC is a publicly traded company with significant public visibility in the gaming industry, we anticipate that GPR will argue — and the court may agree — that RGC is a public figure for purposes of this litigation. Accordingly, we must be prepared to satisfy the actual-malice standard articulated in New York Times Co. v. Sullivan, 376 U.S. 254 (1964), and its progeny. Under this standard, RGC must demonstrate by clear and convincing evidence that GPR published the false statements with knowledge that they were false or with reckless disregard for their truth or falsity.
We believe the evidence will support a finding of actual malice based on the following circumstances:
(a) Financial motive. GPR and its affiliated fund, GPCP, held a short position of approximately 680,000 shares in RDGM at the time of publication, with a notional value of approximately $62.66 million at the pre-publication closing price. GPR stood to profit — and in fact did profit — from the stock-price decline that its publication caused. This financial motive provides powerful circumstantial evidence that GPR was motivated not by a genuine interest in informing the public, but by a desire to drive down RGC's stock price for its own financial benefit. While financial motive alone does not establish actual malice, it is a significant circumstantial factor that California courts have recognized as relevant. See Reader's Digest Ass'n v. Superior Court, 37 Cal. 3d 244 (1984).
(b) Failure to seek comment. GPR did not contact RGC, its auditor Pinnacle, or any gaming regulator prior to publishing Report 1. The failure to contact the subject of an allegation of fraud — particularly when the subject is a publicly traded company with an established investor-relations function — is indicative of reckless disregard for the truth. A publisher genuinely concerned with the accuracy of its assertions would, at minimum, have sought comment from the Company or its auditor before making allegations of this magnitude.
(c) Contradiction of professional audit conclusions. GPR's allegation that RGC fabricated $410 million in revenue directly contradicts the professional conclusions of an independent accounting firm that conducted an audit in accordance with generally accepted auditing standards. GPR offers no credible explanation for why its analysis should be credited over Pinnacle's audit. The willingness to publish allegations that are flatly inconsistent with independent audit conclusions, without seeking to verify those allegations or to confront the auditor's findings, supports an inference of reckless disregard.
(d) Self-serving disclosure. GPR's own standard disclaimer acknowledges its short position and its financial interest in a decline in RDGM's stock price. This self-serving disclosure confirms the commercial nature of GPR's motivation and underscores the inference that the publication was driven by profit rather than by genuine concern for market integrity.
Special Damages. California law requires a showing of special damages — i.e., pecuniary loss — in a trade libel action. See Guess, Inc. v. Superior Court, 176 Cal. App. 3d 473 (1986). Here, the special-damages requirement is clearly satisfied. RGC suffered an approximately $573 million single-day decline in market capitalization directly attributable to Report 1. In addition, RGC is incurring out-of-pocket costs related to crisis communications (Crestline Equity Partners Group Inc.), anticipated forensic audit expenses (supplemental engagement with Pinnacle), and regulatory-response costs. These damages are concrete, quantifiable, and ongoing.
3. Assessment.  The trade libel claim is RGC's strongest cause of action and the primary vehicle for recovery. The combination of audited financial statements contradicting GPR's allegations, GPR's significant short position and profit motive, GPR's failure to contact RGC or its auditor before publication, and the magnitude of the resulting financial harm presents a compelling case for liability and substantial damages. We assess this claim as strong.
B. Intentional Interference with Prospective Economic Advantage
1. Elements of the Claim
Under California law, a claim for intentional interference with prospective economic advantage requires the plaintiff to establish: (1) the existence of an economic relationship between the plaintiff and a third party, with the probability of future economic benefit to the plaintiff; (2) the defendant's knowledge of this relationship; (3) intentional acts by the defendant designed to disrupt the relationship; (4) actual disruption of the relationship; and (5) damages. See Glenrock Corporation, 29 Cal. 4th 1134 (2003). The interference must be independently wrongful — i.e., the defendant must have engaged in conduct that is independently actionable apart from the interference itself. Id.
2. Application to the Facts
Economic relationships. RGC maintains extensive and ongoing economic relationships with a wide range of third parties, including institutional investors, retail shareholders, sell-side analysts, lending counterparties, gaming regulators (whose continued approval is necessary for the maintenance of RGC's gaming licenses), business partners, content-distribution partners, and casino customers. These relationships carry a probability of significant future economic benefit to RGC, including continued investment in RDGM stock, favorable financing terms, gaming-license renewals, and ongoing business revenue.
Defendant's knowledge. GPR was aware of these relationships. Indeed, GPR's report was specifically targeted at RGC's investor base. The report's distribution strategy — simultaneous publication on a financial-research website and social media platform with 142,000 followers, timed to coincide with the trading day — was designed to reach the very investors, analysts, and market participants with whom RGC maintains economic relationships.
Intentional acts designed to disrupt. The publication of Report 1 — alleging that RGC fabricated $410 million in revenue through fictitious transactions — was an intentional act designed to disrupt RGC's relationships with its investors and the broader financial community. The publication was calculated to destroy investor confidence, drive down the stock price, and cause institutional investors and analysts to reassess their positions in RDGM — all of which GPR intended because it stood to profit from the resulting stock-price decline through its short position.
Actual disruption. Report 1 in fact disrupted RGC's economic relationships. The stock declined 8.4% in a single day, reflecting a loss of approximately $573 million in market capitalization. Shareholder inquiries have been sharply elevated. Institutional investors are reevaluating their positions. Ongoing business negotiations may be adversely affected, and the specter of gaming-license complications — while speculative at this stage — cannot be ruled out if the allegations gain traction with regulators.
Damages. The damages arising from this claim overlap substantially with those arising from the trade libel claim and are discussed in detail in Section V below.
Independent wrongfulness. The independently wrongful conduct requirement is satisfied by the trade libel claim itself. GPR's publication of false statements of fact with actual malice constitutes conduct that is independently actionable apart from the interference.
3. Assessment.  The intentional-interference claim is viable and complements the trade libel cause of action. It provides an additional theory of liability and may be particularly useful in capturing categories of harm — such as disruption of business negotiations and damage to regulatory relationships — that are not neatly captured by the trade libel claim alone.
C. Unfair Business Practices (Cal. Bus. & Prof. Code § 17200)
1. Elements of the Claim
California Business and Professions Code § 17200 prohibits any "unlawful, unfair, or fraudulent business act or practice." The statute provides for injunctive relief and restitution (including disgorgement of ill-gotten gains) and operates as a broad, flexible remedy designed to capture business conduct that falls outside the reach of more specific statutory prohibitions.
2. Application to the Facts
GPR's publication of materially false reports while holding a large short position and profiting from the resulting stock-price decline constitutes an unfair business practice within the meaning of § 17200 under each of the statute's three prongs:
(a) Unlawful prong. GPR's conduct is "unlawful" insofar as it constitutes trade libel actionable under California Civil Code § 46(3). The unlawful prong of § 17200 borrows from other laws and treats violations of those laws as independently actionable unfair business practices.
(b) Unfair prong. GPR's scheme — publishing false fraud allegations about a public company while holding a significant short position in that company's stock, thereby profiting from the stock-price decline caused by its own false publications — constitutes conduct whose harm to victims substantially outweighs any legitimate utility. Under the "tethering" test applied in Cel-Tech Communications, Inc. v. Los Angeles Cellular Telephone Co., 20 Cal. 4th 163 (1999), conduct is "unfair" if it threatens an incipient violation of an antitrust law, violates the policy or spirit of such laws, or involves conduct whose harm to victims outweighs its utility. GPR's scheme plainly satisfies this standard.
(c) Fraudulent prong. GPR's report is "fraudulent" in the sense that it is likely to deceive reasonable members of the investing public. The report presents itself as rigorous financial analysis while omitting the critical context that GPR's own financial interest in a stock-price decline creates a profound conflict of interest that colors every aspect of its analysis. While GPR includes a disclaimer disclosing its short position, the disclaimer is buried at the end of the report and does not adequately convey the magnitude of GPR's financial incentive to present a misleading picture of RGC's financial condition.
Remedies. The § 17200 claim is particularly valuable because of the remedies it makes available. Injunctive relief could include an order prohibiting GPR from publishing further false or misleading reports about RGC. Restitution could include disgorgement of GPR's short-sale profits. Based on GPR's 680,000-share short position and the $7.77 per-share decline following Report 1, GPR's unrealized gain on this position is approximately $5.28 million as of the close of trading on February 7, 2024. If GPR closes its position at even lower prices — particularly if additional reports drive further declines — the profit could be significantly greater. Disgorgement of these profits would serve both compensatory and deterrent purposes.
3. Assessment.  The § 17200 claim is viable and provides remedies — particularly injunctive relief and disgorgement — that are not available through the trade libel and interference claims alone. It adds meaningful strategic value to the overall litigation.
D. Potential Additional Claims (for Amended Complaint)
As the litigation develops and additional evidence emerges — particularly if GPR publishes additional reports — we recommend considering the following additions to the pleadings through a First Amended Complaint:
Negligent Misrepresentation. If additional reports demonstrate a pattern of careless or inadequate research by GPR, a negligent misrepresentation claim may become viable. Such a claim would not require proof of actual malice, but would require a showing that GPR owed a duty of care in its publications, breached that duty by failing to conduct adequate investigation, and caused pecuniary loss to RGC as a result. This claim is not asserted in the current complaint but should be reassessed as the factual record develops.
Adding Defendants. We recommend that RGC consider adding Grizzly Peak Capital Partners LP — the entity that actually held the short position in RDGM — as a defendant. GPCP's direct financial interest in the stock-price decline caused by Report 1, combined with Tobias Fenchurch's role as sole managing member of both GPR and GPCP's general partner, supports piercing the organizational separation between the research entity and the trading entity. Additionally, we recommend considering adding Fenchurch individually as a defendant if evidence supports that he personally directed the publication of Report 1 with knowledge of its falsity or with reckless disregard for the truth. These additions would strengthen the litigation and expand the pool of assets available to satisfy a judgment.
IV. ANTI-SLAPP RISK ASSESSMENT
A. Overview of Cal. Code Civ. Proc. § 425.16
California's anti-SLAPP statute, codified at Code of Civil Procedure § 425.16, provides a mechanism for the early dismissal of claims that arise from a defendant's exercise of the constitutional rights of free speech or petition in connection with a public issue. The statute was enacted to protect defendants from meritless lawsuits designed to chill the exercise of First Amendment rights, and it provides for an expedited motion process and mandatory recovery of attorney's fees by a prevailing defendant.
The anti-SLAPP analysis proceeds in two prongs:
Prong One — Protected Activity. The defendant bears the initial burden of demonstrating that the challenged claims arise from an act taken in furtherance of the defendant's right of free speech or petition in connection with a public issue or an issue of public interest.
Prong Two — Probability of Prevailing. If the defendant satisfies prong one, the burden shifts to the plaintiff to demonstrate a probability of prevailing on the merits of the challenged claims. This is not a full merits determination, but requires the plaintiff to present a prima facie showing — i.e., evidence sufficient to sustain a favorable judgment if credited by the trier of fact.
If the anti-SLAPP motion is granted, the plaintiff's claims are stricken, and the defendant is entitled to an award of attorney's fees and costs. If the motion is denied, discovery proceeds and the case continues on the normal track. An anti-SLAPP motion must be filed within 60 days of service of the complaint, though the court may grant extensions for good cause. We anticipate that GPR will file an anti-SLAPP motion, likely in April 2024 following service.
B. Prong One — Protected Activity
GPR will argue — and we should expect this argument to receive serious consideration by the court — that its research reports constitute speech on a matter of public interest. Specifically, GPR will contend that the financial condition and accounting practices of a publicly traded company worth $6.8 billion, operating in the heavily regulated gaming industry, are matters of legitimate public concern, and that GPR's reports constitute constitutionally protected commentary on those matters.
There is some force to this argument. California courts have broadly construed the concept of "public interest" under the anti-SLAPP statute, and it is difficult to argue that the financial integrity of a major public company is not a matter of public concern.
However, RGC has a strong counter-argument: the commercial-speech exception. Under California law, the anti-SLAPP statute does not apply to speech that arises from commercial transactions, including statements made in the course of commercial conduct for the purpose of obtaining a competitive advantage. See Veltason Strong-Tie Co. v. Gore, 49 Cal. 4th 12 (2010). GPR did not publish Report 1 for the purpose of informing public discourse or advancing a matter of genuine public concern. GPR published Report 1 for the purpose of driving down the price of RDGM stock so that GPR and its affiliated hedge fund, GPCP, could profit from their 680,000-share short position. This is commercial speech, motivated by a direct and substantial financial interest in the outcome of the speech.
The fact that GPR disclosed its short position in its standard disclaimer does not immunize the speech from the commercial-speech exception; to the contrary, the disclosure underscores the commercial nature of the speech. GPR is not a disinterested whistleblower or a public-interest organization. It is a profit-driven entity that publishes reports for the purpose of moving stock prices in a direction that benefits its own portfolio.
We anticipate that the court's analysis of prong one will be closely contested, and we should prepare a robust opposition brief on this issue. However, we believe we have strong arguments that GPR's conduct falls within the commercial-speech exception and that the anti-SLAPP statute should not shield GPR from liability.
C. Prong Two — Probability of Prevailing
Even if GPR clears prong one — i.e., even if the court concludes that GPR's reports constitute protected activity under the anti-SLAPP statute — RGC must merely demonstrate a probability of prevailing on its claims. This is a relatively low bar. The plaintiff is not required to prove its case at this stage; it need only make a prima facie showing that its claims have sufficient merit to warrant proceeding to trial.
We are confident that RGC can satisfy this burden based on the following evidence:
(a) Evidence of falsity. Pinnacle Audit & Advisory LLP's clean audit opinions for fiscal years 2021 through 2023 directly contradict GPR's allegation that RGC fabricated $410 million in revenue. This evidence is powerful and will be central to our showing at the anti-SLAPP stage.
(b) Evidence of actual malice. GPR's 680,000-share short position and resulting profit motive provide compelling circumstantial evidence of actual malice. GPR's failure to contact RGC, Pinnacle, or any gaming regulator before publishing Report 1 further supports an inference of reckless disregard for the truth. The clean audit opinions, which GPR either ignored or chose to disregard, provide additional evidence that GPR published its allegations without adequate basis.
(c) Evidence of damages. The $573 million single-day decline in market capitalization is documented and quantifiable. Crisis-communications costs are accruing through the Ashgrove Equity Partners engagement. Additional damages categories are developing.
D. Strategic Recommendation
Based on our assessment, we conclude that the anti-SLAPP risk is manageable and should not deter RGC from pursuing aggressive litigation. We recommend the following preparatory steps:
1.  Begin assembling declarations and evidence for the anti-SLAPP opposition immediately, well in advance of GPR's anticipated motion.
2.  Obtain a declaration from Walter Ng, CPA, the engagement partner at Pinnacle Audit & Advisory LLP, confirming the clean audit opinions for fiscal years 2021 through 2023 and describing the scope and rigor of Pinnacle's audit procedures.
3.  Obtain a declaration from CFO Priya Ramaswaran directly rebutting the revenue-fabrication allegation, explaining the nature and legitimacy of the intercompany transactions identified by GPR, and confirming the accuracy of RGC's reported financial results.
4.  Obtain a declaration from Janelle Hu, VP of Investor Relations, documenting the market impact of Report 1, including the stock-price decline, elevated shareholder inquiries, and disruption to investor-relations activities.
5.  Prepare a comprehensive legal brief addressing both prongs of the anti-SLAPP analysis, with particular emphasis on the commercial-speech exception.
If the anti-SLAPP motion is denied, it will constitute a significant strategic victory for RGC. A denial at this stage would confirm the viability of RGC's claims, open the door to full discovery — including discovery into GPR's trading activity, communications, and research methodology — and substantially strengthen RGC's leverage for all remaining phases of litigation, including any potential settlement negotiations.
V. DAMAGES ASSESSMENT AND EXPERT ENGAGEMENT
A. Preliminary Damages Framework
RGC's damages from Report 1 are substantial and continue to develop. We organize the preliminary damages framework as follows:
Market-Capitalization Loss. The single-day decline in RGC's market capitalization following Report 1 was approximately $573 million. This figure represents the aggregate loss experienced by RGC's shareholders as a result of the stock-price decline from $92.14 to $84.37 per share on February 7, 2024. If GPR publishes additional reports — as our intelligence suggests — and those reports cause further declines, the cumulative market-capitalization loss could be significantly greater.
It is important to note that the $573 million figure represents the gross market-capitalization decline, not the net damages attributable to GPR's false statements. An econometric event study will be necessary to isolate the portion of the stock decline attributable to GPR's false statements as distinguished from general market movements, sector-specific trends, and other confounding factors. Event-study methodology is the standard analytical framework in securities-related damages quantification, and it will be essential to our damages case at trial.
Out-of-Pocket Costs (Accruing). RGC is incurring, and will continue to incur, significant out-of-pocket costs as a direct result of GPR's publication:
•  Crisis communications and public relations: RGC has retained Crestline Equity Partners Group Inc., under the direction of Simone Arecchi, to manage crisis communications and assist in the preparation of public-facing statements. These costs are ongoing and are expected to continue for the duration of the public controversy surrounding Report 1.
•  Forensic audit and supplemental engagement: We anticipate that RGC will need to retain Pinnacle Audit & Advisory LLP for a supplemental forensic audit engagement designed to address, on a line-by-line basis, the specific allegations raised in Report 1. This engagement will generate significant professional fees.
•  Regulatory-response costs: If GPR's publications trigger inquiries from the Nevada Gaming Control Board, the SEC, or other regulatory bodies, RGC will incur costs in responding to those inquiries, including the potential engagement of specialized Nevada gaming regulatory counsel.
•  Litigation costs: The costs of this litigation itself — attorney's fees, expert fees, court costs, and related expenses — are being incurred as a direct consequence of GPR's conduct.
GPR's Short-Sale Profits. GPR's profit from its short position is a key data point for both compensatory damages and punitive-damage arguments. At the time of publication, GPCP held a short position of approximately 680,000 shares. The pre-publication closing price was $92.14; the post-publication closing price was $84.37. If the position remained open as of the close on February 7, the unrealized gain on the short position was approximately:
680,000 shares × $7.77 per share = $5,283,600
This figure represents an unrealized gain as of the close on February 7 and assumes the position has not yet been closed. If the stock declines further — particularly as a result of additional GPR reports — and the position is closed at lower prices, GPR's realized profit will increase substantially. Tracking GPR's trading activity will be an important component of discovery.
Disgorgement. Under the § 17200 UCL claim, disgorgement of GPR's short-sale profits may be available as a form of restitution. Disgorgement serves both compensatory and deterrent functions and would ensure that GPR does not retain the financial benefit of its wrongful conduct.
B. Recommendation: Early Expert Retention
We strongly recommend the early retention of a damages expert specializing in financial economics and event-study methodology. Early retention is critical for several reasons: (1) it will allow the expert to capture and preserve real-time market data as events unfold, including trading data on the day of publication and in the days following; (2) it will enable the expert to establish a clean analytical framework before the factual record becomes more complex (particularly if additional reports are published); and (3) it will position us to present a rigorous and well-supported damages analysis at the anti-SLAPP stage, if necessary.
We recommend retaining Dr. Elena Vostrikova at Meridian Forensic Economics LLC, 1901 Avenue of the Stars, Suite 900, Los Angeles, California 90067. Dr. Vostrikova is an experienced financial economist who has served as a testifying expert in numerous securities-related damages cases in both state and federal courts. She has extensive experience in event-study methodology, trade-libel damages quantification, and the analysis of market microstructure. Her credentials and testimony record are strong, and she is well-suited to the demands of this engagement.
We recommend that a formal retention letter be sent to Dr. Vostrikova as soon as possible — ideally within the next 48 hours — to secure her availability and to begin the process of data collection and preliminary analysis.
VI. IMMEDIATE ACTION ITEMS AND RECOMMENDATIONS
A. Litigation Posture
We recommend an aggressive litigation posture. The strength of RGC's evidence — including clean audited financial statements from an independent accounting firm, extensive regulatory oversight by multiple gaming commissions, and the absence of any prior regulatory inquiry or adverse finding — combined with GPR's financial motive in the form of a 680,000-share short position with approximately $62.66 million in notional exposure, supports vigorous prosecution of the claims asserted in the complaint.
The complaint was filed on February 5, 2024, in the Superior Court of California, County of Los Angeles, and has been assigned Case No. 24STCV-01892. Service must be effected on GPR at its principal office at 44 Maiden Lane, 7th Floor, San Francisco, California 94108, and on its registered agent, Pacific Corporate Services LLC, at 1209 Orange Street, Wilmington, Delaware 19801. We are coordinating service through a process-service company and expect service to be effected within the next ten business days.
B. Monitoring for Additional Reports
As noted above, our intelligence suggests that GPR intends to publish additional reports targeting RGC. We recommend the following monitoring and contingency measures:
1.  Monitor grizzlypeakresearch.com and the @GrizzlyPeakRes social media account on a daily basis for new publications or previews of forthcoming reports.
2.  If additional reports are published, assess whether the content and circumstances warrant seeking emergency injunctive relief, including a temporary restraining order ("TRO") and/or a preliminary injunction. The threshold for such relief is high — particularly given First Amendment considerations — but may be met if additional reports demonstrate a pattern of deliberately false publications designed to manipulate the market for GPR's financial benefit.
3.  If additional defendants should be added — including GPCP and Tobias Fenchurch individually — prepare a First Amended Complaint promptly. We recommend having a draft First Amended Complaint substantially prepared in advance so that it can be filed on short notice if circumstances warrant.
C. Regulatory Coordination
The publication of Report 1 may trigger inquiries from one or more regulatory bodies, including the Nevada Gaming Control Board, the New Jersey Division of Gaming Enforcement, the Mississippi Gaming Commission, or the U.S. Securities and Exchange Commission. We recommend the following steps:
1.  Coordinate with RGC management to identify and respond promptly to any inquiries from gaming regulators or the SEC triggered by GPR's publications.
2.  Consider proactive engagement with specialized Nevada gaming regulatory counsel. We recommend Hargrove & Sato LLP, 300 South 4th Street, Suite 1800, Las Vegas, Nevada 89101, as experienced gaming regulatory practitioners who can assist RGC in navigating any regulatory inquiries and, where appropriate, in obtaining confirmatory statements or clearances from the Nevada Gaming Control Board.
3.  Consider requesting that the Nevada Gaming Control Board conduct an independent audit of RGC's random-number-generator systems used in its electronic gaming platforms. Although this request goes beyond the specific allegations in Report 1, our intelligence suggests that GPR's anticipated Report 2 may target RGC's RNG software. A proactive, voluntary request for an independent regulatory audit would serve to preemptively rebut any future allegations regarding gaming-software integrity and would demonstrate RGC's commitment to transparency and regulatory compliance.
D. Insurance Notification
We recommend that RGC promptly notify its directors-and-officers ("D&O") liability insurer, Atlas National Insurance Group, 777 South Figueroa Street, Suite 2800, Los Angeles, California 90017, of the GPR publications and the potential claims arising therefrom. Even if no affirmative coverage claim is triggered at this time, timely notification is important to preserve RGC's coverage rights under its D&O policy. Many D&O policies contain notice provisions that require the insured to provide notice of potential claims within a specified period, and failure to comply with these provisions can result in a loss of coverage. We recommend that the notification be made in writing and that a copy be provided to this firm for our files.
E. Internal Investigation
We recommend that RGC, through its General Counsel's office, conduct a targeted internal review to confirm the integrity of all matters raised in Report 1. This review should be designed to give the litigation team complete confidence in the rebuttal evidence and to identify any issues that may require further attention before they become problems in litigation.
Specifically, we recommend the following:
1.  Review the specific intercompany transactions identified by GPR in Report 1 and confirm their legitimacy, business purpose, and proper accounting treatment.
2.  Coordinate with Pinnacle Audit & Advisory LLP (Walter Ng, CPA) for a supplemental forensic audit engagement focused on the matters raised in Report 1.
3.  Interview relevant personnel, including finance, accounting, and operations staff, to gather information that may be useful in rebutting GPR's allegations and in preparing declarations for the anti-SLAPP opposition.
4.  Ensure that the results of the internal review are communicated to the litigation team at Calderwood & Harkness on a privileged basis.
F. Expert Retention
As discussed in Section V.B above, we recommend the following expert retentions:
1.  Dr. Elena Vostrikova / Meridian Forensic Economics LLC — for event-study analysis and damages quantification. A formal retention letter should be sent within 48 hours.
2.  Pinnacle Audit & Advisory LLP — for a supplemental forensic audit engagement addressing the specific allegations in Report 1. This engagement should be coordinated through RGC's General Counsel's office and should be structured to maximize both its evidentiary value and its protection under the attorney-client privilege and work-product doctrine.
G. Public Communications
All public statements by RGC regarding Report 1 and its aftermath should be coordinated through Crestline Equity Partners Group Inc. (Simone Arecchi) to ensure consistent messaging and to avoid any statements that could be used against RGC in litigation.
We recommend that RGC issue a firm but measured public response to Report 1. The statement should:
•  Reaffirm the integrity of RGC's financial statements and the accuracy of its reported financial results.
•  Reference the clean audit opinions issued by Pinnacle Audit & Advisory LLP for fiscal years 2021 through 2023.
•  Note that RGC operates under the extensive regulatory oversight of gaming commissions in three states.
•  State that RGC has filed a lawsuit against GPR and intends to vigorously defend its reputation.
•  Avoid detailed engagement with the specific allegations in Report 1, which could inadvertently lend credibility to GPR's claims or create discovery issues.
H. Litigation Hold
We understand that a litigation-hold memorandum was issued on February 5, 2024, by Carlos Espinoza to Derek Olafson and Janelle Hu. We recommend the following steps to ensure full compliance with preservation obligations:
1.  Confirm that the litigation-hold memorandum has been disseminated to all key custodians, including Marcus J. Calloway (CEO), Priya Ramaswaran (CFO), Janelle Hu (VP, Investor Relations), and any other personnel likely to possess documents or communications relevant to the matters raised by GPR.
2.  Ensure preservation of all communications — including emails, text messages, instant messages, voicemails, and other electronic records — regarding GPR, Tobias Fenchurch, Ava Lin, Report 1, and any anticipated future reports.
3.  Ensure preservation of all communications regarding Vermilion Holdings LLC, an entity referenced by GPR in Report 1 that may feature prominently in future reports.
4.  Confirm that any automatic-deletion policies have been suspended for all key custodians and relevant data sources.
5.  Retain a copy of the litigation-hold memorandum and all distribution confirmations for the litigation file.
VII. ENGAGEMENT TEAM AND NEXT STEPS
Calderwood & Harkness's engagement team for this matter consists of the following attorneys:
The fee arrangement for this engagement is a modified hourly structure at 85% of Calderwood & Harkness's standard rates during the pendency of the litigation. In addition, a 15% success premium will be applied to aggregate fees upon the successful conclusion of the matter, whether by settlement or judgment. This arrangement reflects our confidence in the strength of RGC's claims and our commitment to achieving the best possible outcome for the Company.
Calderwood & Harkness will provide weekly written updates to Derek Olafson regarding all significant developments in the litigation. In addition, we will schedule a conference call with RGC's executive team — including Marcus J. Calloway, Priya Ramaswaran, Derek Olafson, and Janelle Hu — within the next 48 hours to discuss the strategic framework outlined in this memorandum and to address any questions or concerns.
Carlos Espinoza and Hannah Brinkley are currently preparing a detailed legal research memorandum addressing California trade libel elements, actual-malice standards applicable to public-figure plaintiffs, and the anti-SLAPP framework under Cal. Code Civ. Proc. § 425.16. We expect delivery of this memorandum on or before February 12, 2024.
VIII. CONCLUSION
Based on our preliminary assessment, Redstone Gaming Corp. has strong claims against Grizzly Peak Research LLC for trade libel, intentional interference with prospective economic advantage, and unfair business practices under California Business and Professions Code § 17200. The strength of RGC's evidence — anchored by clean audit opinions from Pinnacle Audit & Advisory LLP and buttressed by the extensive regulatory oversight to which RGC's operations are subject — combined with GPR's substantial financial motive in the form of a 680,000-share short position, positions RGC well for aggressive prosecution of these claims.
The risk of an anti-SLAPP motion is present and must be taken seriously, but we assess that risk as manageable. GPR's commercial motive and RGC's strong rebuttal evidence provide a solid foundation for defeating an anti-SLAPP motion at prong one (through the commercial-speech exception) or, failing that, at prong two (through a prima facie showing of probability of prevailing).
Our immediate priorities are as follows:
1.  Effect service of the complaint on GPR and its registered agent.
2.  Monitor GPR's website and social media accounts daily for additional reports.
3.  Retain Dr. Elena Vostrikova at Meridian Forensic Economics LLC for event-study and damages analysis.
4.  Coordinate with Pinnacle Audit & Advisory LLP (Walter Ng, CPA) for supplemental forensic audit.
5.  Engage Nevada gaming regulatory counsel (Hargrove & Sato LLP) for proactive regulatory coordination.
6.  Issue a measured public response through Crestline Equity Partners Group Inc. (Simone Arecchi).
7.  Prepare declarations and evidence for the anticipated anti-SLAPP motion.
8.  Confirm dissemination and compliance with the litigation-hold memorandum.
9.  Assess the advisability of adding GPCP and Tobias Fenchurch as defendants in a First Amended Complaint.
Calderwood & Harkness is fully engaged on this matter and recommends proceeding with maximum vigor. We are available to discuss this memorandum and the recommended course of action at your earliest convenience.
Respectfully submitted,
CALDERWOOD & HARKNESS LLP
By: ________
Francesca Morano, Partner 333 South Grand Avenue, Suite 4800 Los Angeles, California 90071 Telephone: (213) 555-4800
Email: fmorano@calderwoodharkness.com
Date: February 8, 2024
Distribution:
cc: Samuel Eklund, Partner, Calderwood & Harkness LLP Carlos Espinoza, Associate, Calderwood & Harkness LLP Hannah Brinkley, Associate, Calderwood & Harkness LLP
PRIVILEGED AND CONFIDENTIAL — ATTORNEY-CLIENT COMMUNICATION / ATTORNEY WORK PRODUCT DO NOT FORWARD WITHOUT APPROVAL OF COUNSEL
Name | Role
Francesca Morano | Responsible Partner
Samuel Eklund | Billing Partner
Carlos Espinoza | Lead Associate
Hannah Brinkley | Working Associate

PRIVILEGED AND CONFIDENTIAL ATTORNEY-CLIENT COMMUNICATION ATTORNEY WORK PRODUCT — PREPARED IN ANTICIPATION OF LITIGATION

MEMORANDUM

I. EXECUTIVE SUMMARY

II. BACKGROUND

III. ANALYSIS OF CLAIMS

IV. ANTI-SLAPP RISK ASSESSMENT

V. DAMAGES ASSESSMENT AND EXPERT ENGAGEMENT

VI. IMMEDIATE ACTION ITEMS AND RECOMMENDATIONS

VII. ENGAGEMENT TEAM AND NEXT STEPS

VIII. CONCLUSION

CALDERWOOD & HARKNESS LLP

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