HG Vora Capital Management, one of PENN Entertainment’s activist investors, has accused the latter company of violating the law by reducing the board seats for election at its upcoming shareholder meeting. HG Vora now seeks an injunction that would make PENN’s recent Board Reduction Scheme invalid.
HG Vora Says PENN Violated PA Business Laws
PENN Entertainment recently announced that it plans to reduce the number of seats for election at its upcoming Annual Meeting of Shareholders. Under the change, the seats for election have been reduced from three to two. This controversial move, however, attracted the ire of one of its investors, which is now seeking legal retribution.
HG Vora just filed a complaint in the US District Court for the Eastern District of Pennsylvania, alleging that PENN Entertainment has committed a violation by reducing the number of seats for election.
According to the complaint, PENN Entertainment has violated the Pennsylvania Business Corporation Law by opting to reduce the number of seats for election. At the same time, the company’s board was accused of not following its fiduciary duties.
In addition to that, HG Vora alleged that PENN has violated federal securities law by not following the universal proxy rules and making false and misleading statements in its proxy materials filed with the US Securities and Exchange Commission (SEC) related to the upcoming shareholder meeting.
HG Vora asserted that PENN’s Board Reduction Scheme is a “self-serving” action that will only benefit the current CEO and chair and has no real corporate purpose. HG Vora implied that PENN’s board’s change of the election rules violates shareholder democracy.
HG Vora Seeks an Injunction
In its complaint, HG Vora emphasized the importance of shareholder democracy and said that PENN and its board must be held accountable. To that end, the investor seeks declaratory and injunctive relief that would make the Board Reduction Scheme invalid.
HG Vora also seeks to force PENN to correct any statements in its proxy materials that are false or misleading.
Finally, HG Vora demanded that PENN allow shareholders an opportunity to elect all three independent nominees previously proposed by HG Vora. For context, these include Carlos Ruisanchez, Johnny Hartnett, and William Clifford.
HG Vora also asked PENN shareholders to review its full complaint.