It’s On: Vora Initiates Proxy War Against Penn Entertainment

• Hedge fund officially declares proxy war against casino company
• Vora urges investors to vote for its directors slate
• Says Penn has destroyed shareholder value

In a widely expected move, HG Vora filed a definitive proxy statement against Penn Entertainment (NASDAQ: PENN), making clear that its quest to gain three board seats is being taken directly to the casino operator’s shareholders.

HG Vora Parag Vora wrote a letter to Penn investors in which he called the gaming company’s recent decision to reduce the number of directors up for election at the June annual meeting to two from three a “brazen act of entrenchment.” The money manager has been pushing Penn to nominate William Clifford, Johnny Hartnett, and Carlos Ruisanchez to its board, but the ESPN Bet parent said last month only two directors’ slates will be open.

Penn approved the candidacies of Hartnett and Ruisanchez, but in a quixotic move, opted to leave out Clifford — an executive who held high-level roles at Pinnacle Entertainment, which was acquired by Penn seven years ago.

The Board did so just ten days after declaring to us there were three seats up for election,” Vora wrote in reference to the decision to cut the number of board seats up for election. “We believe this desperate maneuver not only deprives shareholders of their fundamental right to elect directors of their choosing but is also a violation of law and a breach of the Board’s fiduciary duties.”

The hedge fund also launched www.WinAtPENN.com — a website dedicated to highlighting the failings of Penn leadership, including CEO Jay Snowden and Chairman David Handler. The site also contains information on the “Gold” proxy card, which is the asset manager’s directors’ slate.

Vora Rips Penn Share Price Performance

HG Vora owns 4.8% of Penn equity, making it one of the largest shareholders in the gaming company. So when Vora speaks, Penn investors listen, and like other owners of the operator’s equity, the hedge fund is displeased by the stock’s performance.

“PENN’s stock has underperformed those of its publicly traded gaming peers over the last two, three, four, five, six, seven, eight, nine and ten years,” wrote the hedge fund’s founder. “In our view, this is the direct result of an unsuccessful strategic shift that has been plagued by value-destructive deal-making, reckless capital allocation and poor execution. We believe PENN trades at a discount to its intrinsic value because its management team and Board of Directors have lost credibility and investors fear further value-destructive decisions.”

Those “value-destructive decisions” likely include Penn’s insistence on doling out significant capital to be part of the online sports industry while not garnering noteworthy market share. After paying more than $500 million to acquire Barstool Sports, Penn gave up on that unit in 2023, selling it back to founder David Portnoy for just $1 so it could move forward with a costly deal with ESPN.

“ESPN Bet is the 8^th-ranked online sports betting platform in the U.S., with its market share hovering around 2%,” adds Vora. “Additionally, by nearly all relevant measures, the Company is less profitable and less valuable than it was before the Company embarked on its digital transformation.”

Vora Makes Case for Clifford

Vora notes that Penn’s decision to let Hartnett and Ruisanchez stand for election to the board “is a step in the right direction” and an acknowledgment that “change is inevitable.” However, the money manager says Clifford should be part of the mix, too.

“In our view, that is precisely why PENN’s directors reduced the number of Board seats available at the Annual Meeting,” concludes the hedge fund boss. “We believe PENN’s directors do not want Mr. Clifford in the boardroom to scrutinize their dealmaking or question their strategy or leadership — even though that is exactly what is needed.”