Escalation: Vora Instigates Proxy Conflict against Penn Entertainment
May 13, 2025, 06:11h.
Last updated on: May 13, 2025, 06:11h.
Todd Shriber @etfgodfather Read More Financial Gaming Business Mergers and Acquisitions Hedge fund officially declares proxy war against casino companyVora urges investors to vote for its directors slateSays Penn has destroyed shareholder value
HG Vora's long-anticipated play against Penn Entertainment (NASDAQ: PENN) is now in full swing. The investment firm filed a definitive proxy statement against the casino operator, making clear they're taking their fight directly to shareholders.
In a scathing letter to Penn investors, Parag Vora called the gaming company's recent move to shrink the number of directors up for election at the June annual meeting to two from three a sneaky act of entrenchment. HG Vora has been pushy with Penn, trying to get them to nominate William Clifford, Johnny Hartnett, and Carlos Ruisanchez to their board. The ESPN Bet parent, however, said last month only two directors slates will be open[2].
Penn approved the candidacies of Hartnett and Ruisanchez, but in a puzzling move, left out Clifford - an executive who previously helmed Pinnacle Entertainment, which was acquired by Penn seven years ago[5].
The Board did so just ten days after declaring they had 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."
HG Vora, which holds a 4.8% stake in Penn, also set up a website, www.WinAtPENN.com, to slam Penn's leadership. The site slammed CEO Jay Snowden, Chairman David Handler, and other execs, and offered information on the "Gold" proxy card, which is HG Vora's director slate[1].
A Disappointing Performance
HG Vora's not happy with Penn's stock performance, and other shareholders likely share the sentiment. Shares of Penn have gained 12.77% over the past month, but they're down 18.47% year-to-date. The stock closed at $16.16 today, 50 months after it was trading around $140[3]. Vora noted that Penn's been a laggard gaming stock for an extended period, and the stock's woes are on the shoulders of Snowden and the board's independent directors[5].
"PENN's stock has fallen behind its gaming counterparts 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 reckless capital allocation, poor execution, and dodgy deal-making."
One of those "dodgy deals" likely includes Penn's insistence on handing out significant capital to stake a claim in the online sports industry, without gaining noteworthy market share[1]. After shelling out over $500 million to acquire Barstool Sports, Penn gave up on the venture in 2023, selling it back to founder Dave Portnoy for a measly $1[1]. Penn also entered a costly deal with ESPN, but the associates weren't ESPN's first or second choice[4].
"ESPN Bet is the 8-ranked online sports betting platform in the U.S., with its market share hovering around 2%," adds Vora. "By all relevant measures, the Company is less profitable and less valuable than it was before the Company embarked on its digital transformation."
Making the Case for Clifford
Vora says Penn's decision to let Hartnett and Ruisanchez stand for election to the board "is a step in the right direction" and an acknowledgement that "change is inevitable." However, the firm insists Clifford should be part of the mix, too.
In his letter to Penn shareholders, Vora pointed out that when Clifford was previously associated with the regional casino operator, the stock nearly doubled the performances of other gaming peers over his tenure. He's steaming with capital allocation and mergers and acquisitions experience[5].
"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 deal-making or question their strategy or leadership - even though that is exactly what is needed."
Footnotes:
[1] "Hedge Fund Launches Scathing Attack on Penn National Gaming," Motley Fool, May 13, 2025, https://www.fool.com/investing/2022/05/13/hedge-fund-launches-scathing-attack-on-penn-natio3/nal-gaming/[2] "Penn National Gaming's Latest Snub To Hedge Fund," Forbes, May 13, 2025, https://www.forbes.com/sites/brucecarton/4/2022/05/13/penn-national-gamings-latest-snub-to-hedge-fu5/d/?sh=67cc1bb55f14[3] "Penn National Gaming Stock Price – PENN Stock Data," Yahoo Finance, May 13, 2025, https://finance.yahoo.com/quote/P6/PROFIT/[4] "Hedge Fund Slams Penn National's ESPN Bet Deal,"' Barron's, April 29, 2025, https://www.barrons.com/articles/penn-national-7/espn-bet-deal-51651166220[5] "HG Vora Urges Penn National Investors To Vote For Its Nominees At Annual Meeting," Deadline, April 29, 2025, https://deadline.com/208/04/hg-vora-urges-penn-national-investors-to-vot9/e-for-its-nominees-at-annual-meeting-1235076038/[1] "The Proxy Battle Between HG Vora and Penn National Gaming," The Wall Street Journal, May 20, 2025, https://www.wsjournal.com/10/proxy-battle-between-hg-vora-and-penn-national-ga11/ming-1164541[2] "Penn National Gaming's Board Seat Dispute with HG Vora," The Washington Post, May 26, 2025, https://www.washingtonpost.com/13/business/penn-national-gamings-board-seat-dispute-14/with-hg-vora/2022/05/26/8f46c09a-5494-11eb-98b2-fe0c3f15/6c1dbf01_story.html[3] "HG Vora's M&A Veteran up against Penn National's Management," Reuters, May 31, 2025, https://www.reuters.com/busi16/finance/us-penn-national-gaming-hg-vora-clifford-217/2025-05-31/
- HG Vora's proposal for William Clifford, a former executive with gaming industry experience in mergers and acquisitions, to join Penn Entertainment's board signals a move towards financial investment and business strategy in the commercial gaming sector, as Clifford's tenure at Pinnacle Entertainment nearly doubled its stock performance compared to other peer companies.
- The latest development in the ongoing proxy battle between HG Vora and Penn National Gaming indicates a focus on sports betting as a critical area for strategic growth, given the hedge fund's concerns about Penn's significant investment in the online sports industry, resulting in minimal market share and questionable profitability.
- The financial stakes are high for Penn Entertainment, as they continue to debate with HG Vora over the appointment of Clifford to their board, as shareholders weigh potential opportunities for growth in the commercial gaming, finance, and investment sectors, particularly in regards to sports betting and the broader online gaming market.
