HG Vora files lawsuit against PENN over alleged “affront to shareholder democracy”
Activist investor also seeks injunctive relief over “false and misleading proxy materials” as boardroom battle heats up
HG Vora has filed a lawsuit against PENN Entertainment and the operator’s board over an alleged “affront to shareholder democracy” after its third board candidate was denied the chance to stand for election.
The suit, which has been filed in the US District Court for the Eastern District of Pennsylvania, is seeking declaratory and injunctive relief from the ESPN Bet, Hollywood Casino, and theScore Bet operator.
The case centers around HG Vora’s claims that PENN has illegitimately thwarted HG Vora’s attempts to place three members on its board of directors.
Last month, PENN announced that former Superbet CEO Johnny Hartnett and Sorelle Capital CEO Carlos Ruisanchez had been recommended to the board ahead of a shareholder vote at the 2025 AGM.
However, HG Vora wanted to place former PENN exec William J Clifford in the boardroom, too, which the operator failed to greenlight.
As a result, HG Vora lodged its claim on the grounds that PENN breached its fiduciary duties when reducing the number of board seats up for election from three to two.
The complaint also alleged that PENN broke federal securities laws by “failing to abide by the universal proxy rules and making materially false and misleading statements and omissions in proxy materials” submitted to the SEC.
The company’s contention stems from a PENN press release, which HG Vora argued gave the impression of an agreement between the two in relation to just Hartnett and Ruisanchez being nominated.
HG Vora has requested PENN’s so-called “board reduction scheme” to be ruled invalid, as well as a correction of the “materially false and misleading statements,” and allow for Clifford to also join the board, subject to shareholder approval.
It was further alleged that the primary reason for the board reduction scheme was to reduce shareholder influence on the company’s direction.
A HG Vora statement read: “PENN’s board reduction scheme, implemented amid a contested election and while facing the prospect of losing three board seats is, in HG Vora’s view, a self-serving action with no legitimate corporate purpose.
“HG Vora believes the board’s manipulation of the company’s election rules is an affront to shareholder democracy and only benefits its incumbent directors, notably its chairman and CEO.
“HG Vora believes that substantial changes are necessary to restore accountability and ensure all options are considered to maximize shareholder value.”
The 44-page complaint also detailed some of HG Vora’s qualms with the running of PENN’s interactive division, including citing CEO Jay Snowden’s role in the deemed “underperformance”.
The activist investor claimed Snowden and the board have overseen “reckless spending of nearly $4bn on poorly negotiated and overpriced deals, gross mismanagement, and steep operating losses.”
Those include Barstool Sportsbook, with Barstool eventually being sold back to its founder Dave Portnoy for $1, and the $1.5bn, 10-year license with Disney to run ESPN Bet.
PENN’s 2025 proxy statement read: “As a testament to the board’s commitment to strong refreshment, three of our eight directors have been appointed to the board within the past five years, with two additional new director nominees standing for election at the 2025 annual meeting.
“With the nomination of Johnny Hartnett and Carlos Ruisanchez to the board, we are expanding expertise in capital allocation, finance, digital and innovative, technology-focused strategies.
“On April 25, 2025, Ron Naples retired from the board and Barbara Shattuck Kohn and Saul Reibstein informed the board that they will not stand for re-election at the 2025 annual meeting.”
PENN said it does not comment on pending litigation when approached by EGR North America.