Proxy Battle Looms: HG Vora Prepares to Challenge Penn Entertainment's Management

Investor HG Vora Prepares For Shareholder Battle Against Penn Entertainment

In a significant move, activist investor HG Vora has reduced its stake in Penn Entertainment to 4.8%, a decision made to smooth the licensing process and remove restrictions that previously prevented the firm from submitting advance notice of recommended board nominees.

HG Vora's reduced stake means it is no longer subject to the restrictions that come with holding more than 5% of a company's shares. This move allows HG Vora to prepare for a potential proxy fight to secure board seats at the gaming giant.

Penn Entertainment, which operates over 40 gaming venues across 20 states, has been facing challenges recently. The company's shares have declined significantly over the past year, currently trading at around 1/7 of their March 2021 value. The decline is attributed to weakness in iGaming and online sports betting.

HG Vora, which holds 18.5% of Penn Entertainment shares, has been critical of the company's board composition and believes Penn intentionally expanded the number of Class III directors to preserve a sympathetic slate through the 2024 board elections.

In May last year, a Penn investor, The Donerail Group, criticized the company's missteps in online gaming and suggested selling the company to unlock value for shareholders. There were also rumors of Penn being a potential target for Boyd Gaming, but neither company confirmed any talks were held.

As part of its strategy, HG Vora plans to submit advance notice to Penn Entertainment and has been working with gaming regulators in more than two dozen states where Penn operates. However, the firm has been unable to obtain a gaming license in one unnamed state.

HG Vora claims Penn is in violation of the Pennsylvania Business Corporation Law of 1988 and its own articles of incorporation. The activist investor has not disclosed the specific violations it believes Penn has committed.

Penn Entertainment's ESPN Bet mobile sports betting application is available in 19 states, with Washington, D.C., set to join soon. The company's wide reach in the gaming industry has made it a target for investors like HG Vora, who are looking to influence its direction and potentially boost shareholder value.

As the situation unfolds, it will be interesting to see how Penn Entertainment responds to HG Vora's demands and whether a proxy fight will ensue. Stay tuned for updates on this developing story.