Fears of an "unelected pick": HG Vora challenges PENN's board refreshment strategy
Casino major PENN Entertainment Inc. (NASDAQ: PENN) finds itself entangled in an increasingly contentious dispute with one of its significant shareholders, HG Vora Capital Management, LLC, concerning the composition of PENN’s Board of Directors.
The conflict, marked by legal proceedings and sharply worded public statements, revolves around the number of directors to be elected at PENN’s upcoming Annual Meeting of Shareholders on 17 June 2025, and HG Vora’s determined push to see three of its nominees seated on the board.
This boardroom battle goes beyond a standard activist campaign, touching upon fundamental principles of corporate governance, intricate legal strategies, and the ever-present complexities of regulatory compliance within the gaming sector. The fact that HG Vora has vehemently criticised PENN’s performance in its interactive sports betting business, suggests that the fight for board seats may be symptomatic of deeper divergences regarding the company’s strategic direction.
Also read: PENN nominates two HG Vora-backed candidates to board – SigmaPlay
Board seat shuffle: Nominations, reductions, and post-meeting plans
The current flashpoint in the dispute involves the precise number of board seats available for election and the process by which they will be filled. HG Vora initially put forward three candidates: Johnny Hartnett, Carlos Ruisanchez, and William Clifford. Following these nominations, PENN Entertainment’s board, on 25 April 2025, took the step of reducing the number of director seats to be contested at the Annual Meeting from what HG Vora understood to be three, down to two.
In a subsequent move, PENN Entertainment agreed to include Hartnett and Ruisanchez on its slate of nominees, thereby making their election to the two declared open seats effectively uncontested by the company itself. PENN has argued that because both the company and the activist investor are recommending these same two individuals for the two available positions, the situation does not constitute a “contested election” for these particular seats.
However, the nomination of William Clifford by HG Vora met with staunch resistance from PENN. The company stated that it found Clifford “unsuited” for a position on its Board. The reasons PENN provided for this rejection are multifaceted, including a prior rejection for a Board seat in 2020. More substantively, PENN cited concerns over what it described as Clifford’s failure to demonstrate a necessary “base level of open-mindedness” during the interview process. The firm also referred to his time as PENN’s former chief financial officer, when PENN contends that he promoted against central strategic initiatives that went on to be vital to margin enhancement and overall achievement.
Also read: HG Vora vs. Penn Ent: Shareholder woes clash with casino’s claims – SigmaPlay
These initiatives reportedly included modernising IT and financial processes, developing a customer database and loyalty programme, investing in hotel and amenity developments, and adopting standardised software and shared services. Further, PENN highlighted that Institutional Shareholder Services (ISS) had twice recommended that shareholders withhold votes from Clifford during his tenure at Drive Shack Inc., citing “material governance failures.” Finally, PENN contended that Clifford lacks experience in digital gaming and online sports betting—areas deemed critical for PENN’s future strategic direction—and that his general experience in real estate and finance would be redundant with the expertise already present on the Board.
Adding another layer to the controversy, HG Vora has seized upon a statement made by PENN Entertainment on 15 May 2025. In that communication, PENN mentioned its intention to “continue to consider opportunities to further refresh the Board“. HG Vora interprets this language as a thinly veiled plan by PENN to expand its Board after the conclusion of the Annual Meeting and then unilaterally appoint a director of its own choosing to a three-year term. Such an action, HG Vora contends, would effectively fill the board seat that was removed from the shareholder vote just weeks prior. The reference to a “three-year term” for a director potentially appointed by the board post-meeting hints at the possibility that PENN Entertainment may utilise a classified board structure, where directors serve staggered multi-year terms. Classified boards can make it more challenging for shareholders to enact rapid or sweeping changes to a board’s composition, a feature often criticised by corporate governance advocates and targeted by activist investors, as it can insulate boards from immediate shareholder pressure.
PENN’s move to decrease the number of seats electable, especially following HG Vora having put up three candidates, is interpreted by the activist investor as a strategic move intended to restrict shareholder control and reinforce the position of existing board members. From PENN’s side, such measures can be presented as prudent board management, in order to have only the most appropriate and qualified candidates in consideration, as well as for there to be due order in the process of board refreshment. While PENN’s statement that the election for two of the seats is “uncontested” is factually accurate for candidates Hartnett and Ruisanchez, this framing downplays the ongoing conflict concerning the third potential seat and the integrity of the overall election process, which was legally challenged by HG Vora.
Accusations of entrenchment and legal recourse
In response to PENN’s actions, HG Vora has launched a vigorous public and legal counter-offensive. The investor group, which owns about 4.8 percent of PENN Entertainment, alleges that the board of the company is conducting an “ongoing assault on shareholder rights” and taking “self-serving actions” that are devoid of any “legitimate corporate purpose,” all apparently intended to entrench incumbent directors and avoid real accountability. The unilateral decrease in the number of electable seats at the forthcoming Annual Meeting is a pillar of this allegation.
In order to counter PENN’s actions, HG Vora has brought its battle to the courts. The company made a motion on 14 May 2025, for speedy relief and speedy trial in federal court in Pennsylvania. The primary objective of this legal action is to obtain injunctive relief that would compel PENN to count all votes cast for its third nominee, William Clifford, at the Annual Meeting. PENN Entertainment is actively opposing this motion.
Interestingly, HG Vora clarified that it did not seek a preliminary injunction that could have potentially delayed the Annual Meeting. This decision, HG Vora explained, was made to prevent PENN’s Board from having an “excuse to delay the Annual Meeting and avoid seating the other two HG Vora-nominated director candidates – Johnny Hartnett and Carlos Ruisanchez,” for whom there is mutual agreement.
As part of its campaign, HG Vora is strongly urging PENN shareholders to utilise its GOLD proxy card to cast their votes. The stated purpose is to elect all three of its nominees—Hartnett, Ruisanchez, and Clifford—and thereby send an unequivocal message to PENN’s current leadership that “genuine change is needed.” HG Vora further states that PENN’s Board, through its recent actions, has “forfeited the right to select directors without shareholder input“.
Also read: Penn posts record revenue in interactive segment amid lawsuit by investor – SigmaPlay
PENN Entertainment’s defence
PENN Entertainment has mounted a robust defence against HG Vora’s campaign, portraying the activist investor’s broader agenda as detrimental to shareholder value and fraught with regulatory risks. In a detailed letter to shareholders dated 15 May 2025, PENN characterised HG Vora’s demands as “value-destructive,” “short-sighted,” and “self-serving“. Among the specific proposals PENN criticised was HG Vora’s advocacy for an approximately 50 percent leveraged buyback, which PENN argued would elevate the company’s debt to unstable levels and curtail investments in future growth. PENN also took issue with HG Vora allegedly urging the cancellation or postponement of retail growth projects in several key markets and demanding a public announcement of a strategic review of the entire business, including its Interactive segment, despite what PENN described as advice from state gaming authorities that such a review was impermissible without necessary licenses.
A significant thrust of PENN’s defense revolves around accusations that HG Vora has demonstrated a consistent disregard for state gaming regulations and directives. This is a particularly salient line of argument in the highly regulated gaming industry, where compliance is paramount. PENN alleged that HG Vora’s Schedule 13D filing, which disclosed its intent to nominate directors and push for governance changes, violated an institutional investor waiver previously granted by state gaming authorities. This waiver had reportedly allowed HG Vora to accumulate its substantial 18.5 percent stake in PENN. According to PENN, state gaming authorities subsequently informed both parties that HG Vora’s attempts to influence operations and strategy, as well as nominate directors, were improper and impermissible while its licensure was under review. PENN further claimed that HG Vora attempted to circumvent Massachusetts licensing requirements by reducing its voting power through derivatives while maintaining its economic exposure. PENN concluded that HG Vora’s purported “reckless disregard for regulators and applicable law puts PENN and all of its shareholders at risk“. By stressing these alleged regulatory missteps, PENN seeks to portray HG Vora not merely as a demanding investor, but as a potentially hazardous one whose actions could jeopardise PENN’s crucial gaming licenses and overall operational stability.
In defense of its own governance and board actions, PENN asserts that its Board of Directors diligently oversees an omnichannel growth strategy with a clear long-term focus. The company states it has been actively engaged in a board refreshment initiative since 2020 and has maintained extensive engagement with HG Vora. Reinforcing this, PENN’s May 19 letter noted that following the election of Hartnett and Ruisanchez, 75 percent of PENN’s directors will have joined the Board since 2019, and the company “will continue to consider opportunities to further refresh the Board“.
Regarding the immediate proxy situation for the two agreed-upon candidates, PENN announced its decision “not to spend the time and money to solicit proxies for the PENN White Card over the HG Vora Gold Card.” This decision, PENN stated, was “reinforced by recent conversations with our largest shareholders“. This mention of discussions with significant shareholders could suggest that PENN has polled their sentiment and feels that its existing position regarding the accommodation of Hartnett and Ruisanchez enjoys enough support, so it can grant a strategic concession regarding proxy card solicitation of these two nominees. It could also serve as an indirect communication to HG Vora about the perceived limits of broader shareholder support for a more aggressive confrontation on all fronts. While PENN’s May 15 letter extensively detailed its objections to William Clifford, the subsequent May 19 communication shifted focus to the “uncontested” nature of the election for the other two seats.
Navigating the proxy maze and shareholder choice
The current situation presents PENN Entertainment shareholders with a somewhat complex voting landscape. They are faced with two different proxy cards: PENN’s own White Card, which the company has indicated it will not actively solicit for the two candidates on whom both sides agree (Hartnett and Ruisanchez), and HG Vora’s GOLD proxy card. PENN Entertainment has clarified that votes cast for Messrs. Hartnett and Ruisanchez on either proxy card will be duly counted at the Annual Meeting.
However, HG Vora is strongly encouraging shareholders to use its GOLD card, not only to support Hartnett and Ruisanchez but also, crucially, to cast a vote for their third nominee, William Clifford. This means that while a vote for Hartnett and Ruisanchez might seem straightforward, the choice of proxy card carries additional implications. Voting on the GOLD card, as advocated by HG Vora, is positioned as a broader statement of support for all three of its nominees and, by extension, a call for more significant change at the board level.
Despite PENN’s attempts to simplify the choice for two of the nominees, the existence of dual proxy cards and the ongoing, very public legal battle over the eligibility of the third nominee could still lead to confusion among some shareholders. They must discern not only which candidates they support but also what message their choice of proxy card sends. HG Vora is effectively leveraging its GOLD card as more than just a voting mechanism; it is a tool for shareholders to “send a message” of dissatisfaction with the current board’s governance and strategic oversight, irrespective of the ultimate legal determination on Clifford’s candidacy. A substantial number of votes for Clifford on the GOLD card, even if not officially counted due to legal outcomes, could serve as a powerful symbolic indicator of shareholder discontent that PENN’s board might find difficult to ignore.
Also read: Penn Entertainment revamps board
Market reaction
While the shares of PENN Entertainment rose over 11 percent in the past month, they have fallen close to 23 percent in the past six months.
All eyes are now turning to PENN Entertainment’s Annual Meeting of Shareholders, which is scheduled to take place on 17 June 2025. This meeting is poised to be more than a routine corporate event; it will serve as a critical juncture in this ongoing power struggle. The outcome of HG Vora’s legal action concerning William Clifford’s nomination will be a major factor, potentially being decided shortly before or concurrently with the meeting.
