HG Vora Preps Proxy Fight Against Penn, Nominates Three Directors

Posted on: January 29, 2025, 04:25h. 

Last updated on: January 29, 2025, 04:25h.

HG Vora appears to be taking a proxy fight to Penn Entertainment (NASDAQ: PENN) and has submitted three nominations to the regional casino operator’s board of directors, marking the first time in the asset manager’s history that it’s nominated directors to a company’s board.

PENN Play
An image for Penn Entertainment. Investor HG Vora has nominated three directors to the company’s board and will pursue a proxy fight. (Image: Penn Entertainment)

The hedge fund, which is one of the gaming company’s largest shareholders, today blasted the board for “years of poor judgment” and costly missteps in the online sports betting space — an area in which the investor said Penn had no prior “expertise or credibility.” Like some other investors, HG Vora believes Penn’s sports betting follies overshadow the operator’s portfolio of other attractive online assets and its core regional casino business.

PENN’s Board has numerous deficiencies which have translated directly into abysmal returns for shareholders,” said the money manager in a statement. “Over the past four years, PENN’s shares have declined -81%, dramatically underperforming the S&P 500 Index and its closest peer, Boyd Gaming, which have returned +69% and +73%, respectively, over the same period.”

Parag Vora, founder and portfolio manager of HG Vora, said the gaming company has engaged in a “misguided” sports betting strategy that to do date has cost $4 billion, or roughly a third more than the operator’s market value of $3.04 billion. In August 2023, Penn announced a $1.5 billion deal with Walt Disney’s (NYSE: DIS) ESPN to use the ESPN Bet trademark while severing ties with Barstool Sports in a $1 transaction. Penn paid more than $500 million for Barstool.

HG Vora Nominees Have Interesting Penn Ties

HG Vora nominated William Clifford, Johnny Hartnett, and Carlos Ruisanchez — two of whom have interesting ties to Penn — to the operator’s board.

Clifford has three decades of gaming industry experience and most recently served in high-level roles, including chief financial officer (CFO) at Gaming and Leisure Properties (NASDAQ: GLPI) — the real estate investment trust (REIT) spun out of Penn in 2013. Penn is now one of the REIT’s biggest tenants. Prior to his time at GLP, Clifford was CFO of Penn for 12 years. During that time, the stock surged 20x, according to Vora.

Ruisanchez, the co-founder of Sorelle Capital and Sorelle Hospitality, previously served as president and CFO of Pinnacle Entertainment – a company that was acquired by Penn. Vora said he was “instrumental in transformative moves to unlock shareholder value,” including Penn’s purchase of the Ameristar casinos.

Hartnett is the nominee without prior ties to Penn, but he’s steeped in gaming industry experience. He’s a non-executive director at Superbet Group where he was chief executive officer for five years. Prior to that, he was with FanDuel parent Fluttter Entertainment (NYSE: FLUT) for more than two decades.

Change ‘Urgently Needed’ at Penn

It’s not surprising that HG Vora is pursuing a proxy fight against Penn. Earlier this month, news emerged that the hedge fund was paring its stake in the casino operator to avoid a lengthy state-by-state licensing process, allowing it to more swiftly nominate directors

For his part, Vora believes Penn CEO Jay Snowden has been overpaid and that slack corporate governance has allowed the board to avoid punishment for “persistent bad judgment and disappointing shareholder returns.”

“It should be clear to all stakeholders that change is urgently needed to address these failings and help PENN achieve its full potential,” he said in the statement. “To that end, this is the first time in our firm’s 15-year history that HG Vora has decided nominating directors is necessary. We believe these three highly qualified, independent director nominees bring the proven track records of enhancing shareholder value and the skills and industry expertise to help maximize value for all PENN shareholders.”