HG Vora Blasts Penn Entertainment Over Board Composition

Posted on: January 19, 2024, 08:59h. 

Last updated on: January 19, 2024, 08:59h.

HG Vora, which is the largest investor in Penn Entertainment (NASDAQ: PENN), demanded the regional casino restructure its board of directors while claiming the current configuration violates Pennsylvania corporate law.

A slide from a Penn Entertainment investor presentation. Hedge fund HG Vora wants the casino operator to restructure its board. (Image: Penn Entertainment)

In a recent letter to the gaming company signed by Mandy Lam, general counsel for HG Vora, the hedge fund asserted there’s an “unequal allocation” of members across the various classes of Penn directors and that violates the Pennsylvania Business Corporation Law of 1988 (BCL) as well as the operator’s own articles of incorporation.

The current structure of the Board is legally improper and disenfranchises shareholders by artificially constricting the number of directors who may stand for re-election at the Company’s 2024 annual meeting,” according to the letter.

In a December 13D filing with the Securities and Exchange Commission (SEC), HG Vora revealed it built an 18.5% stake in Penn via common stock and options. The money manager requested the gaming company grant it board seats.

HG Vora Shows Activist Hand with Penn

HG Vora, which has a lengthy history of investing in gaming companies, indicated it’s pushing for change at Penn with the demand for board seats — a hall mark of many activist investors. That activism continued with the claim that Penn’s board structure is flawed.

The timing of the hedge fund’s board activism toward the casino operator is pertinent because the company commenced director elections on Jan. 8 and the polling runs through Feb. 7. Penn’s 11 directors include CEO Jay Snowden and Gaming and Leisure Properties (NASDAQ: GLPI) CEO Peter Carlino. GLPI is the largest owner of real estate on which Penn casinos reside.

HG Vora hasn’t mentioned specific Penn directors it wants to replace if any. Of the 11-member board, 10 directors are white and four are women.

“Our board of directors is made up of professionals from many disciplines — including investment banking, asset management, tax accounting and consulting, advertising, gaming/entertainment and more — and their level of expertise is unparalleled,” according to the gaming company’s website.

HG Vora Wants Fast Remedy

Corporate governance niceties aside, HG Vora detailed how Penn may be in violation of the BCL. In the letter to the board, the hedge fund noted that Penn had seven board members in 2020 — two apiece in Class I and Class III roles and three in Class II. In November, the director count increased to eight with the addition of another Class III member.

HG Vora added that just two days before Penn’s 2021 annual member, another Class director was added, bringing that group to four.

“Since that time, PENN’s allocation of members across each class of the Board (two in Class I, three in Class II and four in Class III) fails to comply with the requirements of the BCL and the Articles that the class sizes be ‘as nearly equal in number as possible,’” the money manager wrote. “We expect the Company to remedy this violation promptly, and we reserve all rights to take action to ensure PENN complies with the BCL and the Articles.”