Investor Vora Files Lawsuit Against Penn University, Alleges Board Seat Incident as a Threat to Shareholder Democracy
Title: Hedge Fund Accuses Penn Entertainment of Broken Rules and Betrayal of Shareholder Rights* Date: May 7, 2025, 03:14h.* Updated: May 7, 2025, 03:15h.* Author: Todd Shriber @etfgodfather* Categories: Finance, Gaming Business, Mergers and Acquisitions, Legal
** Finnish gaming titan PENN Entertainment is currently under fire after an explosive lawsuit filed by HG Vora Capital Management.** In the filing, Vora claims the gaming giant may have run afoul of federal and state laws by playing dirty in their efforts to maintain power within the company's boardroom.
Boardroom Battle
The complaint, filed with the United States District Court for the Eastern District of Pennsylvania, alleges that PENN has engaged in self-serving activities by dramatically reducing the number of board seats up for election at their annual meeting. By slashing the number of directors seats from three to two, HG Vora suggests that PENN is attempting to stifle shareholder democracy and preserve the incumbent board's grip on the gaming company, particularly its chairman Jay Snowden and CEO David Handler.
According to Vora, the board's manipulation of the election process is nothing more than an affront to investors. "The Board's manipulation of the Company's election rules is an affront to shareholder democracy and only benefits its incumbent directors," the money manager said in a statement.
How We Got Here
HG Vora, with a long history in gaming investments, took an 18.5% stake in Penn back in late 2023. Despite the operator's strong regional casino business, Vora has voiced concern over Penn's missteps in the online sports betting space. Missteps, like the $1 sale of Barstool Sports, have left investors focusing on the company's sports betting mistakes rather than their thriving casinos.
In January, Vora made a move, announcing its readiness for a proxy fight against Penn. At the time, it nominated William Clifford, Johnny Hartnett, and Carlos Ruisanchez – each seasoned industry veterans – with the expectation that three seats would be up for a vote at the annual meeting next month. Penn responded, pledging to review those nominations.
While no agreement between Vora and Penn has been reached as of yet, Penn did say it plans to nominate Hartnett and Ruisanchez. Clifford, a former Penn executive and high-level Pinnacle Entertainment alumni, was mysteriously missing from Penn's chosen nominees. In a statement released on April 28, Vora claimed that on April 25, it had discussed with Penn how to best fill three director vacancies, only for Penn to take "an extraordinary action" by cutting the number of directors spots to be filled to two from three.
The Legal Battle Ahead
HG Vora has made it clear that they will be pressing forward with a proxy fight to ensure their nominees – Clifford, Hartnett, and Ruisanchez – are given the chance to stand for election. In the legal filing, the shareholder maintains that the incumbent board has indulged in Snowden's excessive compensation and risky sports betting ventures.
The lawsuit also accuses Penn of violating federal securities laws, specifically the universal proxy rules, and making materially false and misleading statements in proxy materials filed with the SEC.
In the past, HG Vora has had numerous gaming company investments, but this case marks the first time the hedge fund has embarked upon a mission to secure board seats. Clearly, they believe the stakes are high and that PENN Entertainment is in dire need of change.
- The lawsuit filed by HG Vora Capital Management accuses Penn Entertainment of potentially violating federal and state laws by manipulating the election process to preserve the incumbent board's grip on the company.
- HG Vora contends that the reduction of board seats from three to two by Penn is an affront to shareholder democracy, benefiting only the incumbent directors and neglecting the interests of investors.
- In the legal filing, HG Vora has alleged that Penn has indulged in self-serving activities, including Snowden's excessive compensation and risky sports betting ventures, which have not been in the best financial interests of the company or its shareholders.
- The financial benefits of having industry veterans like William Clifford, Johnny Hartnett, and Carlos Ruisanchez on the board could bring fresh perspectives and improve themanagement of Penn Entertainment, particularly in the online sports betting space, according to HG Vora.
- HG Vora, with a focus on gaming investments, has embarked upon a mission to secure board seats for the first time, believing that the stakes are high and that change is crucial for the success of PENN Entertainment.
