HG Vora Readies Proxy Fight Against Penn Entertainment

Shares of Penn Entertainment (NASDAQ: PENN) rallied in late trading Tuesday following a regulatory filing by activist investor HG Vora indicating the hedge fund could be readying a proxy fight against the regional casino operator.

In December 2023, it was revealed that HG Vora, a hedge fund with a track record of investing in casino equities, held 18.5% of Penn shares and was demanding that the gaming company grant it board seats. Not only did that make the money manager one of the largest Penn investors, it would have required it to obtain gaming licenses in the states in which Penn operates — a cumbersome process that could delay activist efforts.

In a new 13D filing with the Securities and Exchange Commission (SEC), HG Vora said that since January 2024, it’s been working gaming regulators in more than two dozen states in which Penn operates to obtain licensing and to shed the “restricted” label, potentially allowing it to push for board seats at Penn. The hedge fund reduced its Penn stake to 4.8% to smooth the process.

Following extensive dialogue with the gaming regulator in the single state which recently confirmed it could not, under its customary timeframe, complete its licensure review of the Reporting Persons’ applications (which were initially submitted in January 2024 and deemed complete in May 2024) by the Issuer’s deadline for receiving advance notice, the Reporting Persons decided to restructure its investment in the Issuer,” according to the filing. “On January 13, 2025, the Reporting Persons reduced their voting and dispositive power with respect to the Issuer’s Common Stock to less than 5% while maintaining their economic interest. “

One unnamed state didn’t grant HG Vora’s request. Penn Entertainment operates more than 40 gaming venues across 20 states and its ESPN Bet mobile sports betting application is available in 19 states with Washington, DC slated to soon join that list.

What HG Vora Wants with Penn

HG Vora previously blasted Penn regarding the composition of its board of directors, claiming the gaming company is in violation of the the Pennsylvania Business Corporation Law of 1988 (BCL) as well as the operator’s own articles of incorporation.

With its stake now below 5%, HG Vora appears to be preparing a proxy fight in which it will take its quest for board seats directly to Penn investors.

“As a result, the Reporting Persons are no longer restricted under the applicable gaming regulations in any state where the Issuer operates from submitting advance notice of recommended board nominees,” HG Vora said in the filing. “The Reporting Persons plan to submit such advance notice to the Issuer.”

HG Vora Could Find Sympathy Among Penn Investors

Shares of Penn are off 11.61% over the past year and with today’s close at $20.56, the stock is worth just about 1/7 of what it traded at in March 2021. That extended decline coupled with weakness in iGaming and online sports betting overshadowing the company’s core business has irked some shareholders, indicating HG Vora could find a receptive audience for its activist plans.

Last May, the Donerail Group — a Penn investor — sent a letter to the board chastising the missteps in online gaming while noting CEO Jay Snowden is over-compensated and that Penn should consider selling itself to unlock value for shareholders.

That spurred a multi-month cycle in which Penn was rumored to be a potential target for rival Boyd Gaming (NYSE: BYD), but analysts said Penn was unlikely to be a willing seller and neither company confirmed talks were held.