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Hilton Grand Vacations Inc. (Hilton) and its board of directors have been hit with a lawsuit for allegedly lying to shareholders and misleading them in the company’s acquisition of Diamond Resorts.
The lawsuit was filed on May 7 in New York by lead Plaintiff Marina Clough, who alleges that the company and its board have violated the Securities Exchange Act.
In March, Hilton announced that it had entered into a definitive agreement to acquire Diamond Resorts International, Inc. from funds managed by affiliates of Apollo and Reverence Capital Partners, and other Diamond stockholders, in a stock-based transaction.
According to the lawsuit, a proxy statement recommended that Hilton shareholders vote in favor of the proposed transaction, that would see Apollo Funds and other Diamond stockholders receive 34.5 million shares of Hilton common stock to a value of $1.4 billion.
Upon transaction close, existing Hilton shareholders will own approximately 72 percent of the combined company and the Apollo Funds will own approximately 28 percent of the combined company, according to the lawsuit.
However, the claim states that the proxy statement omits and misrepresents material information concerning Hilton’s and Diamond’s financial projections; the financial analyses performed by Hilton’s financial advisor, Bank of America Securities, Inc. in connection with its fairness opinion; and potential conflicts of interest involving Bank of America (BOA).
The claim says that BOA failed to disclose the true earnings of Diamond Resorts and the true revenue and cost projections, and it also failed to disclose possible conflicts of interest.
“With respect to the [Hilton Grand Vacations] HGV Forecasts, Adjusted Diamond Forecasts, and HGV Pro Forma Forecasts for Combined Company, the Proxy Statement fails to disclose: (1) all line items underlying (i) Total Revenues (Excluding Cost Reimbursements), (ii) Adjusted EBITDA, and (iii) Unlevered Free Cash Flow; (2) Hilton’s, Diamond’s, and the pro forma combined company’s net income projections;1 and (3) a reconciliation of all non-GAAP to GAAP metrics,” the claim states.
According to the lawsuit, disclosure of that information is material because it would provide the company’s shareholders with a basis to project the future financial performance of the Hilton and Diamond Resorts, and would allow shareholders to better understand the financial analyses performed by the company’s financial advisor in support of its fairness opinion.
“Shareholders cannot hope to replicate management’s inside view of the future prospects of the Company.”
The deal is expected to close in the summer of 2021. In the event the transaction is consummated, Clough may seek to recover damages resulting from Hilton’s misconduct, the claim states.
Clough is suing for violations of the Securities Exchange Act and seeks an order of enjoinment, possible damages, legal fees, and a jury trial.
Hilton isn’t the only company facing legal action for alleged violations of the Securities Exchange Act. Recently, shareholders of online luxury-goods marketplace The RealReal filed a class action lawsuit alleging that members of the company’s executive team, board of directors, and underwriting banks lied to shareholders, artificially inflating share prices.
Do you hold shares in a company that you think has violated the Securities Exchange Act? Let us know in the comments section!
Clough is represented by Daniel Sadeh and Zachary Halper of Halper Sadeh LLP.
The Hilton Securities Exchange Act Violations Lawsuit is Clough. v. Hilton Grand Vacations Inc., et al., Case No 1:21-cv-02583, in the United States District Court Eastern District of New York.
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57 thoughts onHilton and Its Board Made False Statements to Shareholders About Diamond Resorts Acquisition, Lawsuit Claims
Why cancel? Why not hold them accountable to cause no harm to the owners of diamonds? Why should good people who love the experience they had before the buyout have to change anything? The right thing was to either leave the resort alone or do an appraisal and then transition the diamond into Hilton. Why is nobody standing up to them for this model? They win when you buy more points, aka forced sale, and they win when you walk away with a forced exit, and we do not win either way. I want affordable annual fees and to enough peacefully my points.
Is it legal for Hilton to buy out members from Diamond and then skyrocket the annual fees with the remaining diamond owners? I ask because I do not understand the push to have owners go to Hilton. I would assume the right way of doing this would have been to buy a diamond and leave it alone or buy a diamond with an owner’s vote to have the diamond points appraised and turned into Hilton points. It feels right or wrong that they bought diamonds to force the diamond owners who are happy with diamonds to purchase more timeshare points at Hilton and then leave the ones who did not buy with a debunked high-cost timeshare because they will possibly increase the annual dues until the remaining owners walk away from something they love. Has anybody ever stopped a company like this from doing what I assume they are doing? Do owners have no rights?
I have been an HGV owner for over 10 years but feel like there should be a class action lawsuit regarding HGV Max. When I bought in they said I would have access to any new locations built or purchased over time. I’m sure most were told the same when buying in. I just went to an update meeting while in California and was told I don’t have access to the new Diamond locations unless I upgrade to Max. Hilton bought Diamond with owners funds and now previous owners can’t have access unless they pay more. This is fraud in my eyes. Fact is – I was thinking about upgrading to get more points in the near future due to getting closer to retirement but now I plan on just using what I have since it is paid off and looking for alternate sources of retirement travel.
Anybody else in this boat and can we do something to force Hilton GV hand on the issue?
I went to a Hilton in New York City. I was told that the package was NOT a timeshare and was talked into getting a credit card and putting $10,000 down. I then less than 3 months later I received a bill for over $3000 for maintenance fees. I contacted a lawyer who told me to not make any other payments (I had only made 1 payment) Now Hilton is ready to settle with me but I have to pay them another $7000 not to foreclose on me.
CAN YOU HELP ME PLEASE!!
Our contract was breached when the public was granted the ability to use our time share at a cheaper price.
Is there anyway to get out of the Hilton Grand Vacation Timeshare? If so, please help me with the information and guidance.
This is a total scam! Nothing but rotten sales people that would take money from a dying mother. They (Diamond) promised us that HGV was the best and we would get a bunch if we just bought in. When they found out were weren’t buying into HGV they the salesman did a 360. If you own and have children have documentation drawn up and in a trust or will they don’t want it. THEY DO NOT HAVE TO ACCEPT! In 2023 the fee went up 9%! RIP OFF by HILTON!
HGV and Diamond is a scam, and nothing but high pressure sale they claim will be an information session about your membership. I want a way out of this trap I got myself into.
We bought into HGVC on April 3,2022. We were told at the time that we would no longer be responsible for Diamond Resorts for HOA fees as of Dec 31,2024. Diamond Resorts is already paid off. Yet Diamond Resorts billed us for 2023. It appears that we are paying for two resorts even though they have merged. We believed that we would only be paying for HGVC. If we have been misled and we have to keep HGVC or cancel Them and Diamond Resorts which already own and paid off, we want a way out. My wife took notes. We do not want to pay for two timeshares.
I think we signed for HGV Max, understanding we were free of HGV and getting more and better resorts. But they left us in THe Club DRI. Now they want us to pay $ 7 K more at 17 1/2 percent extra to eliminate The Club. To me it is blackmail. We are in our 80’s and will be dead before it is paid off.
My husband and I were also lied to multiple times. We were asked to come to an “event of a lifetime” which supposedly included an orientation but turned out to be nothing but a hard sale to get more money after being told the money we had already put in would get us nothing! We ended up shelling out more money and now are not getting what was promised. This should not be allowed to happen to anyone, and we find it sad that it has happened to so many.
We just completed HGV sales presentation yesterday in Orlando. There were not any high pressure sales tactics and after three hours, when we said “no thank you”, that was it. Checked out and received 15,000 Hilton Honor Points.
We bought into HGVC on April 3,2022. We were told at the time that we would no longer be responsible for Diamond Resorts for HOA fees as of Dec 31,2024. Diamond Resorts is already paid off. Yet Diamond Resorts billed us for 2023. It appears that we are paying for two resorts even though they have merged. We believed that we would only be paying for HGVC. If we have been misled and we have to keep HGVC or cancel Them and Diamond Resorts which already own and paid off, we want a way out. My wife took notes. We do not want to pay for two timeshares.
You are very Lucky