Shares of Penn Entertainment (NASDAQ: PENN) surged in late trading on Tuesday following a regulatory filing by activist investor HG Vora. The hedge fund indicated it might be preparing for a proxy fight against the regional casino operator.
In December 2023, it was revealed that HG Vora held 18.5% of Penn shares and was demanding board seats. This considerable stake required the hedge fund to obtain gaming licenses in the states where Penn operates – a process that could delay activist efforts.
In a recent 13D filing with the Securities and Exchange Commission (SEC), HG Vora disclosed that since January 2024, it has been working with gaming regulators in over two dozen states to secure licensing and remove the “restricted” label. This move could potentially allow it to push for board seats at Penn. The hedge fund reduced its Penn stake to 4.8% to facilitate this process.
> “Following extensive dialogue with the gaming regulator in the single state, which recently confirmed it could not, under its customary timeframe, complete its licensure review of the Reporting Persons’ applications (initially submitted in January 2024 and deemed complete in May 2024) by the Issuer’s deadline for receiving advance notice, the Reporting Persons decided to restructure their investment in the Issuer,” according to the filing. “On January 13, 2025, the Reporting Persons reduced their voting and dispositive power with respect to the Issuer’s Common Stock to less than 5% while maintaining their economic interest.”
One unnamed state did not grant HG Vora’s request. Penn Entertainment operates over 40 gaming venues across 20 states, and its ESPN Bet mobile sports betting application is available in 19 states, with Washington, DC expected to join soon.
HG Vora’s Intentions with Penn
HG Vora previously criticized Penn regarding its board composition, claiming the company violated the Pennsylvania Business Corporation Law of 1988 (BCL) and its own articles of incorporation.
In a January 2024 letter to the board, the hedge fund said Penn’s board makeup “disenfranchises shareholders” by limiting the number of directors up for election last year. HG Vora contended that Penn intentionally expanded the number of Class III directors to maintain a favorable slate through the 2024 elections.
With its stake now below 5%, HG Vora seems to be preparing a proxy fight to seek board seats directly from Penn investors.
> “As a result, the Reporting Persons are no longer restricted under the applicable gaming regulations in any state where the Issuer operates from submitting advance notice of recommended board nominees,” HG Vora said in the filing. “The Reporting Persons plan to submit such advance notice to the Issuer.”
Potential Support for HG Vora Among Penn Investors
Shares of Penn have declined 11.61% over the past year and closed at $20.56, roughly 1/7th of their March 2021 value. This extended decline, combined with weakness in iGaming and online sports betting overshadowing the company’s core business, has frustrated shareholders, suggesting that HG Vora might find support for its activist plans.
In May, the Donerail Group, another Penn investor, sent a letter to the board criticizing missteps in online gaming, advocating for potential CEO Jay Snowden’s over-compensation, and suggesting Penn consider selling itself to unlock shareholder value.
This spurred speculation that Penn might be a target for Boyd Gaming (NYSE: BYD), but analysts doubted Penn’s willingness to sell, and neither company confirmed holding talks.
