Penn Claps Back at Vora, Says Investor Violated State Gaming Laws
Posted on: May 15, 2025, 03:49h.
Last updated on: May 15, 2025, 03:49h.
- Penn board says HG Vora demanded massive buyback, pause on improvements at some regional casinos
- Board says hedge fund wanted strategic review of entire company
- Claims investor violated state gaming and federal securities laws
In a wide-ranging letter to investors today, Penn Entertainment’s (NASDAQ: PENN) board of directors claimed activist shareholder HG Vora violated federal securities and state gaming laws in its bid to affect change at the company, adding that the hedge fund pushed the operator pause or scrap improvement projects at several of its regional casinos.
Sent two days after HG Vora officially declared a proxy war, the Penn shareholder missive outlines a saga in which it claims the investor skirted state gaming regulations as part of its plan to get three of its preferred candidates nominated to the casino operator’s board. When the money manager initiated its stake in Penn in late 2023, it owned 18.5% of the shares outstanding — a percentage that has since been pared to about 4.8% so that the investor would not need to obtain gaming permits in all of the states in which Penn does business.
HG Vora has consistently taken action that has violated state gaming requirements. In December 2023, HG Vora filed a Schedule 13D with the SEC disclosing its intention to nominate director candidates to the Company’s Board and push for governance changes, including new Board committees,” wrote Penn’s board.
The directors added that unidentified state regulators approached both Penn and Vora to inform the parties that the hedge fund’s efforts to command sway at the gaming company, including nominating directors, “were improper and impermissible.”
Penn Provides Color on Not Nominating Clifford
In January, Vora nominated William Clifford, Johnny Hartnett, and Carlos Ruisanchez to the Penn board. Those were widely viewed as sensible candidates and last month, Penn said it would allow the nominations of Hartnett and Ruisanchez to move forward.
That wasn’t enough for Vora and the hedge fund has proceeded to accuse Penn of violating federal securities and Pennsylvania corporate laws by cutting the number of directors seats to be filled at the June annual meeting to two from three. The hedge fund expressed dismay that Clifford, who had previous ties to Penn, was left off the nominee slate.
Until today, the gaming company had been quiet regarding why it didn’t approve Clifford’s candidacy. In the shareholder letter, the board said it rejected Clifford for a seat in 2020 following an “an evaluation of his skills and experiences against the needs of the Board” and because during his prior stint at Penn, he objected to technological changes advanced by now CEO Jay Snowden.
“Following his nomination by HG Vora, PENN was willing to reconsider Mr. Clifford’s director candidacy,” noted Penn directors. “As in 2020, Mr. Clifford’s skills and experiences were not determined to be additive or complementary to the Board. In addition, during his interview process, Mr. Clifford failed to demonstrate the base level of open-mindedness required of all directors in order to explore value-generating solutions.”
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 Says Vora Demanded Strategic Review, Massive Buyback
Penn’s board also points out that Vora wanted the operator to commence a leveraged buyback of 50% of its shares outstanding — a move the directors say would have inflated the company’s debt to unsustainable levels.
The directors added that the hedge fund said that plan could be feasible if Penn would stop counting lease obligations as part of its debt burden and that it “should ignore lease-adjusted leverage metrics” — two things that are impossible to do because those are factors in how ratings agencies assess creditworthiness. States also use those metrics to evaluate the financial state of license holders.
Supposedly, Vora also demanded that Penn halt or scrap investment programs at two regional casinos in Illinois, another in Ohio and the M Resort in Henderson, Nevada as avenues for saving money that could be used to repurchase shares. Like other dissatisfied investors, Vora also floated the idea of Penn conducting a strategic review of the entire company, including its online gaming operations, despite objections from regulators.
“In a challenging M&A environment and while the business was gaining momentum, HG Vora also demanded PENN publicly announce a strategic review of the whole business and the Interactive segment — despite explicit direction from state gaming authorities that HG Vora was not permitted to seek provisions of this nature,” according to the letter. “These short-sighted and self-serving proposals would destroy significant shareholder value while potentially helping HG Vora partially or fully exit its PENN position.”
Last June, rumors surfaced that Boyd Gaming (NYSE: BYD) could emerge as a suitor for Penn’s land-based casino assets, but neither company confirmed those talks and the prevailing wisdom on Wall Street is that Penn is not a willing seller. At that time, analysts noted that even if Penn was on the auction block, there would likely be complexities because it’d need to find two buyers — one for its brick-and-mortar assets and another for the struggling ESPN Bet unit.
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