Activist Investor HG Vora Sues Penn Entertainment

In a significant escalation of a proxy battle, activist investor HG Vora Capital Management has filed a lawsuit against Penn Entertainment, alleging the company made materially false and misleading statements in its SEC proxy filings and manipulated board elections to entrench existing leadership.

The lawsuit, filed on May 7, 2025, in the U.S. District Court for the Eastern District of Pennsylvania, claims that Penn’s board reduced the number of seats up for election at the upcoming Annual Meeting from three to two, a move HG Vora describes as the “Board Reduction Scheme.” This action, according to HG Vora, violates Pennsylvania’s Business Corporation Law and breaches fiduciary duties owed to shareholders.

HG Vora is seeking declaratory and injunctive relief, demanding that Penn correct its proxy materials and allow shareholders to vote on all three of HG Vora’s nominated candidates: William J. Clifford, Johnny Hartnett, and Carlos Ruisanchez. The firm argues that these nominees would bring valuable expertise and fresh perspectives to Penn’s board, particularly in light of recent strategic missteps, including the underperformance of the ESPN Bet platform.

As the Annual Meeting approaches, shareholders are urged to review the proxy materials carefully and consider the implications of the ongoing dispute on the company’s governance and strategic direction.

HG Vora Files Lawsuit Against Penn Entertainment Over Proxy Dispute

Key Points:

• Alleged Misleading Proxy Statements: HG Vora accuses Penn of making false statements in its SEC filings, particularly regarding the number of board seats up for election and the nature of the election being uncontested.
• Violation of Shareholder Rights: The reduction of board seats is claimed to undermine shareholder democracy, preventing the election of HG Vora’s full slate of nominees.
• Call for Board Accountability: The lawsuit emphasizes the need for substantial changes in Penn’s board to restore accountability and ensure all options are considered to maximize shareholder value.

On May 7, 2025, HG Vora Capital Management intensified its proxy battle with Penn Entertainment by filing a lawsuit alleging that the company made materially false and misleading statements in its SEC proxy filings and manipulated board elections to entrench existing leadership.

The lawsuit centers on Penn’s decision to reduce the number of board seats up for election at the upcoming Annual Meeting from three to two. HG Vora, which owns approximately 4.8% of Penn’s outstanding common stock, had nominated three candidates for the board: William J. Clifford, Johnny Hartnett, and Carlos Ruisanchez.

According to HG Vora, Penn’s actions violate Pennsylvania’s Business Corporation Law and breach fiduciary duties owed to shareholders. The firm contends that the reduction in board seats is a strategic move to prevent the election of its full slate of nominees, thereby undermining shareholder democracy.

In addition to state law violations, the lawsuit alleges that Penn’s proxy materials filed with the SEC contain false and misleading statements. Specifically, HG Vora points out that the materials incorrectly state the election is uncontested and fail to include all three of its nominees, as required by federal securities laws.

The dispute arises amid broader concerns about Penn’s strategic direction, particularly its investment in the ESPN Bet platform. HG Vora has criticized Penn’s interactive strategy, describing it as highly damaging and a destroyer of shareholder value.

HG Vora is seeking declaratory and injunctive relief, demanding that Penn correct its proxy materials and allow shareholders to vote on all three of its nominated candidates. The firm argues that its nominees would bring valuable expertise and fresh perspectives to Penn’s board, which are necessary to address the company’s current challenges and maximize shareholder value.

As the Annual Meeting approaches, the outcome of this legal battle could have significant implications for Penn’s governance and strategic direction. Shareholders are advised to stay informed and consider the potential impact of the dispute on the company’s future.

HG Vora’s lawsuit against Penn Entertainment underscores the critical importance of transparent and fair corporate governance practices. As the proxy battle unfolds, the case highlights the need for companies to uphold shareholder rights and maintain integrity in their communications with investors. The resolution of this dispute will not only affect Penn’s board composition but could also set a precedent for how similar conflicts are addressed in the future.