HG Vora vs. Penn Ent: Shareholder woes clash with casino's claims
Activist hedge fund HG Vora Capital Management is escalating a proxy fight with casino operator Penn Entertainment, Inc. (Nasdaq: PENN), on the company’s direction, financial performance, and corporate governance.
HG Vora is pushing for significant board representation, initially targeting three director seats, citing deep concerns over Penn’s capital allocation, particularly within its struggling interactive business division, and years of lagging shareholder returns.
On 28 April 2025, Penn announced moves that reduced the number of board seats up for election at its upcoming annual meeting from three to two – a decision HG Vora immediately decried as a “desperate attempt to disenfranchise shareholders and evade accountability“. With Penn’s Annual Meeting scheduled for 17 June 2025, shareholders face a critical vote that could reshape the company’s board and future strategy.
HG Vora’s case
The challenge comes from HG Vora Capital Management, LLC, a New York-based private investment firm led by Parag Vora (featured right on the cover image).
HG Vora’s current campaign is the culmination of a multi-year engagement with Penn Entertainment. As of late April 2025, filings associated with its preliminary proxy materials indicated HG Vora beneficially owns approximately 4.8 percent of Penn’s outstanding common stock, equivalent to 7,250,000 shares.
Earlier filings reveal HG Vora previously held a larger voting stake of around 9.6 percent (14,500,000 shares) and disclosed an even more substantial economic exposure equivalent to 18.5 percent of Penn’s stock (including cash-settled swaps) in December 2023.
Discussions between HG Vora representatives, including Parag Vora and Justin Kerber, and Penn’s leadership, such as CEO Jay Snowden (featured left on the cover image) and CFO Felicia Hendrix, began as early as 2023. Initially, HG Vora reportedly advocated for significant share repurchases, arguing the stock was undervalued. The dialogue evolved, and in September 2023, HG Vora sent a formal letter to Penn’s board expressing a desire to collaborate on key issues including the company’s interactive investment strategy, the then newly announced ESPN Bet transaction, capital allocation, and board composition.
By December 2023, HG Vora escalated its campaign by filing a Schedule 13D with the Securities and Exchange Commission (SEC), publicly disclosing its 18.5 percent economic interest and reiterating its demand for board seats and greater strategic influence.
However, HG Vora’s plans to nominate directors for Penn’s 2024 annual meeting were thwarted by regulatory complications.
In January 2025, HG Vora amended its SEC filings, disclosing it had reduced its voting and dispositive power over Penn stock to below the critical 5 percent threshold. This was achieved while maintaining its significant economic interest through derivative instruments like cash-settled swaps and options. This restructuring resolved the regulatory constraints, clearing the path for HG Vora to formally nominate directors for the 2025 annual meeting.
HG Vora’s criticisms of Penn
- Strategy & capital allocation failure: The hedge fund accuses Penn’s leadership of “years of poor judgment, failed transactions and value-destructive actions“. The primary target is Penn’s interactive strategy, which HG Vora labels an “abject failure“. They contend Penn has squandered approximately $4 billion since early 2020 attempting to establish a foothold in the competitive online sports betting market. This figure includes costly acquisitions, such as Barstool Sports and theScore, as well as the high-profile partnership with ESPN. Despite these massive outlays, HG Vora argues that Penn’s Interactive segment generated a cumulative Adjusted EBITDAR loss nearing $1 billion between 2020 and 2024, with analysts forecasting continued losses.
- Performance & value destruction: HG Vora points towards Penn’s stock performance. Shares have plummeted roughly 87 percent from their peak in March 2021. This exponential decline lags relevant peer groups and broader market benchmarks. HG Vora also points to deteriorating operating performance, presenting data showing declines in key metrics such as EBITDAR and GAAP Earnings per Share, alongside increased net leverage, comparing 2024 results to the period before Jay Snowden assumed the CEO role in 2020.
- Governance concerns: HG Vora criticises Penn’s Board for what it perceives as a lack of accountability and effective oversight. They point to several governance features they believe entrench the board and management and disadvantage shareholders, including the classified board structure (where directors serve staggered terms), plurality voting in uncontested elections, prohibitions on shareholders acting by written consent or calling special meetings, limitations on proxy access nominations, and supermajority voting requirements to amend the company’s bylaws or charter.
- Violation of state law: HG Vora has also accused Penn of violating Pennsylvania state law in 2024, regarding the requirement for board classes to be “as nearly equal in number as possible.” HG Vora had formally raised this issue in a letter to the board in January 2024, arguing the improper classification artificially restricted the number of directors up for election that year. By referencing the past dispute, HG Vora seeks to cast doubt on Penn’s recent and sudden reduction of board seats available for the 2025 election.
- Misaligned executive compensation: The activist contends that executive pay at Penn is excessive and poorly aligned with the company’s actual performance and shareholder returns. Specific criticism has been levelled at CEO Jay Snowden’s compensation, including “Mega-Grants” awarded in 2021 and his total 2024 compensation package, which HG Vora argues is unjustified given the destruction of shareholder value.
HG Vora formally notified Penn on 29 January 2025 of its intent to nominate three director candidates for the Class II seats anticipated to be up for election: Johnny Hartnett, Carlos Ruisanchez, and William Clifford. HG Vora asserts that these nominees are independent and possess critical skills lacking on the current board, including deep knowledge of the gaming industry, rigorous capital allocation discipline, and strong investment and financial expertise.
Also read: MLB players sign licensing deal with PENN Entertainment
Penn Entertainment’s position
Penn Entertainment has mounted a defense of its strategy, performance, and governance practices.
Penn operates a significant portfolio of gaming assets, including 43 properties across 20 states, featuring well-known brands like Hollywood Casino, Ameristar, and L’Auberge. The company’s current strategy stresses leveraging its extensive retail casino footprint in conjunction with its growing digital presence and media partnerships – primarily the ESPN Bet platform in the U.S. and theScore Bet in Canada.
Penn highlights its proprietary technology stack, including its integrated digital sports and iCasino betting platform and an in-house content studio (PENN Game Studios), as key differentiators. Central to this is driving “omnichannel” customer engagement, encouraging players to interact with Penn across both its physical casinos and digital platforms, often incentivised through its PENN Play loyalty program.
In communications to shareholders, Penn acknowledges the significant investments made in its digital transformation over the past five years, positioning them as necessary groundwork for future growth and profitability.
Defense of performance & ESPN bet
While conceding in shareholder communications that recent returns have “fallen short of expectations,” the controversial ESPN Bet partnership, launched in Fall 2023 following a multi-billion-dollar agreement with ESPN, is defended as a cornerstone of its future strategy. Penn stresses the potential of combining ESPN’s unparalleled brand reach and audience with Penn’s operational expertise in the betting space. The company has actively expanded the ESPN Bet brand into its retail sportsbooks across multiple states.
Penn leadership acknowledges that ESPN Bet is currently “not on pace” to achieve the ambitious market share goals initially set (targeting ~20 percent by 2027). However, they counter this by highlighting what they term “indicators of progress“. Specifically, they point to encouraging early data on the value of omnichannel customers.
Read more: Penn Entertainment lays off 100 employees
Penn confirms it has engaged in numerous discussions with HG Vora since early 2023. According to Penn’s account, HG Vora initially pushed aggressively for share buybacks and a recapitalisation strategy. Penn claims the activist’s demands subsequently escalated, seeking direct board representation and the creation of a new board committee specifically to oversee capital allocation, effectively demanding governance control.
The company asserts it made multiple attempts to reach a settlement with HG Vora to avoid a “costly and distracting proxy fight“. This included, Penn claims, offering to immediately appoint two of HG Vora’s nominees, Hartnett and Ruisanchez, to the board. Penn states HG Vora rejected this offer, insisting on either the appointment of all three of its nominees or, alternatively, the appointment of two nominees coupled with public commitments from Penn to undertake broad strategic reviews – commitments Penn claims it was legally constrained from making due to gaming regulations impacting governance structures.
After announcing its intention to nominate Hartnett and Ruisanchez itself, citing their qualifications and relevant experience, Penn also announced the departure of three directors: Ron Naples retired effective immediately, while Barbara Shattuck Kohn and Saul Reibstein notified the company, they would not stand for re-election at the 2025 Annual Meeting. This reduced the board size from nine to eight members, consequently leaving only two Class II director seats open for election. Penn framed these simultaneous moves under the banner of “Board Refreshment“.
Penn confirmed receipt of HG Vora’s notice nominating three candidates and stated its Nominating and Corporate Governance Committee would review them according to standard procedures, with the board’s formal recommendation to be included in its definitive proxy statement. Penn filed its preliminary proxy statement (DEF 14A) on 28 April 2025, officially nominating Hartnett and Ruisanchez for the two available Class II seats.
All eyes are now on the annual meeting scheduled for 17 June 2025. The vote represents a referendum on Penn’s current leadership and strategic path.
