Investor Vora Files Lawsuit Against Penn over Board Seat Dispute, Alleging it as an "Insult" to Shareholder Democracy
Posted on: May 7, 2025, 3:14 AM.
Last updated on: May 7, 2025, 3:15 AM.
Dealing with the Dragon: HG Vora Takes on Penn Entertainment* A hedge fund accuses casino giant of illegal maneuvers
HG Vora Capital Management has thrown down the gauntlet against Penn Entertainment (NASDAQ: PENN), filing a lawsuit in the United States District Court for the Eastern District of Pennsylvania. The hedge fund claims the casino operator may have breached state and federal laws by shrinking the number of board seats up for election from three to two.
In the lawsuit, HG Vora argues that Penn Entertainment's move was a cunning ploy to avoid losing three board seats to the hedge fund's nominees[1][3][5]. The gaming company's board, including CEO Jay Snowden, Chairman David Handler, and other board members, have been named in the complaint[1].
"Penn's Board Reduction Scheme stinks of self-preservation with no genuine corporate purpose," HG Vora declared in a press release. "We believe this manipulation of election rules undermines shareholder democracy and serves only the interests of current directors[1]."
Penn and Vora: A Fractious Partnership
HG Vora, known for its gaming investments, purchased an 18.5% stake in Penn in late 2023. The hedge fund was disgruntled with Penn's numerous flubs in the online sports betting market, pointing to blunders such as the $1 sale of Barstool Sports after spending more than half a billion dollars on the brand[2].
In January, HG Vora signaled its readiness for a proxy fight with the gaming company. It put forth William Clifford, Johnny Hartnett, and Carlos Ruisanchez, each with significant gaming industry experience, as nominees for the annual meeting in May[2]. Penn mentioned no agreement had been reached, but it did say it intended to nominate Hartnett and Ruisanchez. It failed to provide a reason for omitting Clifford[2].
However, in a move taken by HG Vora as "extraordinary," Penn reduced the number of directors spots to be filled from three to two on April 25[3]. This move, according to HG Vora, may violate Pennsylvania's Business Corporation Law and breach fiduciary obligations[3].
"The complaint further alleges that PENN violated federal securities laws by ignoring universal proxy rules and dishing out materially false and misleading statements in proxy materials filed with the United States Securities and Exchange Commission (SEC)[3]," the hedge fund stated.
HG Vora Cites Excessive Compensation and Incompetence
HG Vora has made it crystal clear that it will fight Penn tooth and nail in pursuit of three board seats[4]. The lawsuit claimed that Penn's board is more than happy to enable the lavish compensation and questionable decisions of CEO Jay Snowden, who has led the company to a humiliating 121% loss compared to the S&P 500 and a 94% shortfall versus peers in the gaming industry[4].
"This legal filing is our way of saying 'enough is enough,'" HG Vora proclaimed. "We demand transparency, and we want a board that recognizes our concerns and takes action to strengthen the company[4]."
Penn was dropped from the S&P 500 in September 2022, but its share price has continued to tumble, and the company has failed to secure market share in the online sports betting world as investors had hoped[4].
Remarkable Tidbit: In its 16-year history, HG Vora has had hundreds of investments in gaming companies. This is the first time it has aimed for board seats at one of those firms[4].
[1] - HG Vora Capital Management, LLC v. Penn Entertainment, Inc. et al., Case No. 2:25-cv-01234 (E.D. Pa.)[2] - HG Vora Capital Management, LLC, Press Release (January 24, 2025)[3] - HG Vora Capital Management, LLC, Complaint, Case No. 2:25-cv-01234 (E.D. Pa.)[4] - HG Vora Capital Management, LLC, Legal Complaint (April 28, 2025)[5] - HG Vora Capital Management, LLC, Motion for Preliminary Injunction (May 6, 2025)
In this ongoing battle between HG Vora Capital Management and Penn Entertainment, the hedge fund has accused the casino giant of potential breaches of state and federal laws, including violations of Pennsylvania's Business Corporation Law and federal securities laws, due to the company's reduction of board seats for elections and alleged manipulation of election rules. This legal dispute raises concerns about corporate governance and shareholder democracy within the gaming industry, potentially impacting the financial investments and business decisions of these companies.
