Vora Sues Penn Over Board Seat Flap, Calls it “Affront” to Investor Democracy

Posted on: May 7, 2025, 03:14h.

Last updated on: May 7, 2025, 03:15h.

Todd Shriber @etfgodfather Read More

Expertise: Financial, Gaming Business, Mergers and Acquisitions.

Hedge fund says casino operator may have violated Pennsylvania law
Investor claims gaming company may have also violated federal securities laws

HG Vora Capital Management today filed a legal complaint against Penn Entertainment (NASDAQ: PENN), alleging the gaming company may have run afoul of federal and state laws by reducing the number of board seats up for election to two from three.

In a complaint filed with the United States District Court for the Eastern District of Pennsylvania, the hedge fund claims the regional casino operator pared by one the number of directors seats up for election at the company’s June annual meeting because it was fearful that if three board spots were open, all three would be won by Vora nominees.

PENN’s Board Reduction Scheme, implemented amidst a contested election and while facing the prospect of losing three Board seats is, in HG Vora’s view, a self-serving action with no legitimate corporate purpose,” said the money manager in a press release. “HG Vora believes the Board’s manipulation of the Company’s election rules is an affront to shareholder democracy and only benefits its incumbent directors, notably its Chairman and CEO.”

Penn itself, CEO Jay Snowden and Chairman David Handler as well as the board of directors are named in the Vora complaint.

How Penn, Vora Got Here

HG Vora, which has a long history of gaming investments, took an 18.5% stake in Penn in late 2023. Like some other investors, Vora expressed dismay regarding Penn’s many missteps in the online sports betting space, noting that gaffes, such as the $1 sale of Barstool Sports after paying more than $500 million for it, prompted investors to focus more on the operator’s sports betting mistakes than its sound regional casino business.

In January, the hedge fund said it was ready for proxy fight against the gaming company. At that time, it nominated William Clifford, Johnny Hartnett, and Carlos Ruisanchez — each of which is steeped in gaming industry experience — with the expectation that three seats would be up for a vote at the annual meeting next month. Penn promised to review those nominations.

While noting no agreement with Vora had been reached, Penn said last month it plans to nominate Hartnett and Ruisanchez. No reason was given as to why Clifford wasn’t included. He was previously a Penn executive who held high-level roles at Pinnacle Entertainment, which was acquired by Penn in 2018. In an April 28^th statement, Vora said that on April 25^th, it had discussed with Penn how to best fill three directors vacancies with the hedge reiterating the view that it was likely Clifford, Hartnett, and Ruisanchez would win their respective elections.

Later on April 25^th, Penn took what Vora deemed to be an “extraordinary action” by cutting the number of directors spots to be filled to two from three. In the complaint, the investors alleges that by doing that Penn may have violated the Pennsylvania’s Business Corporation Law with the board potentially breaching its fiduciary obligations.

“The complaint further alleges that PENN violated federal securities laws by failing to abide by the universal proxy rules and making materially false and misleading statements and omissions in proxy materials filed with the United States Securities and Exchange Commission (SEC) regarding the Annual Meeting,” according to the statement.

Vora Blasts Snowden’s Pay, Calls for Independent Directors

Vora has made abundantly clear it will pursue a proxy fight against Penn in an effort to bring all three of its nominees before investors. In the legal filing, the shareholder said three independent directors were viewed as a threat to the current board’s grip on the gaming company — one that’s indulge Snowden’s excessive compensation and sports betting dalliances.

“Under Snowden’s tenure, PENN has lagged a staggering 121% behind the S&P 500 and 94% behind its peers in the gaming industry,” according to Vora’s legal complain. “Notwithstanding that, the Board has continued to enable and encourage Snowden’s risky decision-making and mismanagement by lavishing him with an inflated compensation package that includes nearly $200 million in equity grants. Indeed, a 2023 report from a leading shareholder publication found that Snowden was the third most overpaid CEO of any S&P 500 company.”

The gaming stock was removed from the S&P 500 in September 2022, but its share price has continued faltering and the operator has failed to garner the online sports betting market share investors have been hoping for.

In the court document, Vora offered up a piece information that underscores how dire it perceives the situation at Penn to be. The hedge fund said that in its 16 years of existence, it’s had hundreds of investments in gaming companies, but this is the first time it’s angled for board seats at one of those corporations.