Penn Entertainment to Consider HG Vora’s Board Nominations

The provider of integrated entertainment, sports content, and casino gaming experiences across five segments, Penn Entertainment (PENN), has found itself involved in a proxy fight with its shareholder, HG Vora Capital Management. 

The latter is currently trying to push the appointment of three new members to the company’s board. 

The announcement has led to a sudden 8% rise in Penn’s stock price towards the end of the trading session. The stock gained an additional 1.1% in after-hours trading. 

Although HG Vora is not a typical activist investor, the firm’s actions are a direct result of Penn’s underperformance in terms of management and stock price.

Plummeting Shares Since 2021 

At its peak, Penn’s stock reached an all-time high of $136.47 in March 2021, but since then, the company has seen a significant decline in value, with shares plummeting by over 80%. 

While operating a rich network of casinos and racetracks spread over 20 U.S. states and entering the online sports betting and casino gaming markets in several jurisdictions, Penn’s extensive operations didn’t pay off as planned. 

Accordingly, the company has been criticized for its inability to manage resources and capitalize on growth opportunities effectively.

HG Vora’s dissatisfaction stems from what it perceives as poor capital management, particularly with failed acquisitions. 

The firm has pointed explicitly to Penn’s purchase of Barstool Sports for $550 million and its subsequent resale to its founder for a mere $1, and the $1.5 billion deal inked to allow Penn to use the ESPN brand on its online sportsbooks, as glaring examples of mismanagement. 

HG Vora, which revealed a stake in 888 in 2023, argues that there are untapped opportunities within Penn’s portfolio, which it believes could be leveraged for greater profitability.

Ready to Push Board Nominations 

The hedge fund’s efforts to initiate the proxy fight have been years in the making. Having reduced its stake in Penn to less than 5%, HG Vora was able to launch the proxy battle formally.

The firm has been constantly discussing its efforts with regulators across 24 states, seeking the necessary approvals to submit its nominees to Penn’s board. Now, the firm is prepared to proceed.

HG Vora has a history of involvement in the gambling sector, having previously worked with companies like Gamesys Group and Bally’s. 

The firm’s nominated candidates for Penn’s board are highly experienced. They include Carlos Ruisanchez, Pinnacle Entertainment’s former chief executive officer (acquired by Penn in 2018), William J. Clifford, the former chief financial officer of Penn, and Johnny Hartnett, the former CEO of European gambling giant Superbet Group.

Analysts’ opinions on Penn’s stock outlook are divided. TipRanks gives the stock a Moderate Buy consensus, with eight Buy ratings and seven Hold ratings. 

The average price target of $24.15 suggests a 16.2% upside from current levels despite the nearly 11% loss in the past year.

“Committed to Creating Long-Term Value for All Shareholders”

Penn Entertainment has acknowledged receiving board nominations from HG Vora Capital and said its Nominating and Corporate Governance Committee will proceed to review them according to its standard procedure. 

The committee’s formal recommendations will be included in proxy materials for the 2025 Annual Meeting, although a date has not been set.

Penn took the opportunity to reiterate its commitment to long-term shareholder value. 

“The PENN Board and management team are committed to creating long-term value for all shareholders and will continue to take actions to achieve that objective,” read their press release.