PENN Entertainment shareholder HG Vora Capital Management has issued a public letter to fellow shareholders and a proxy statement encouraging them to vote for its board picks. The firm, which owns about 4.8% of PENN stock, has criticized the company’s leadership.
HG Vora nominated three independent directors in advance of the upcoming annual meeting for PENN on June 17. However, PENN subsequently reduced the number of available seats to two.
The firm says PENN has underperformed under current leadership
According to HG Vora, Penn has underperformed compared to peers in the past 10 years under the leadership of President and CEO Jay Snowden and Board Chair David Handler. The firm attributes the struggles to “value-destructive deal-making, reckless capital allocation, and poor execution.”
PENN, on the other hand, claims it has increased shareholder value.
HG Vora points out that Penn has invested over $4.3 billion in online sports betting since 2020. That includes a deal for over $2 billion for the Canadian sports company, theScore Media. Also, PENN paid over $500 million to acquire Barstool Sports, which it subsequently sold back to its founder, Dave Portnoy, for a single dollar after the controversial partnership proved damaging to PENN’s brand.
Furthermore, after cutting ties with Barstool, Penn committed to pay Disney over $2 billion for the rights to the ESPN Bet trademark. That price was much higher than other suitors were willing to pay, according to HG Vora.
HG Vora claims that Penn’s heavy spending on its online sports betting strategy hasn’t produced proportionate returns. In 2023, the company announced an ambitious 20% sports betting market share goal. However, ESPN Bet has only captured about 2% nationally, ranking 8th across all platforms. In addition to sports betting, Penn has invested in expanding its Hollywood Casino app, which is now available as a standalone app in New Jersey, Michigan, and Pennsylvania.
HG Vora offers a solution to shareholders
HG Vora raised concerns about Penn’s board’s decision at the last minute to reduce the number seats up for election, only ten days after it had said three board positions would be available. The shareholder had already nominated three candidates. It says the move “not only deprives shareholders of their fundamental right to elect directors of their choosing but is also a violation of law and a breach of the Board’s fiduciary duties.”
In its letter, HG Vora says shareholders should not tolerate the manipulation of the electoral process, nor continue to accept the company’s underperformance. It emphasized the need for the board to listen to shareholder input and serve their interests. That’s why HG Vora urges them to vote for the three independent candidates it has nominated using the Gold proxy card, not Penn’s proxy card. The three candidates are:
- Johnny Hartnett, CEO of Paddy Power’s international business
- Carlos Ruisanchez, a gaming executive and former CFO of Pinnacle Entertainment
- William “Bill” Clifford, a financial expert with significant board experience
HG Vora believes these individuals will bring fresh perspectives, strategic discipline, and much-needed accountability to Penn’s Board.
The letter echoes 2024 concerns raised by another shareholder
HG Vora’s open letter comes roughly a year after another shareholder raised similar concerns. In May 2024, Donerail Group also said that Penn’s strategy shift from brick-and-mortar casinos to sports betting and online casinos has been unsuccessful. Donnerail pointed out that since Snowden’s appointment, the company’s stock has fallen by 42.8%. Meanwhile, its peers’ stock rose by 63.9% on average. Another point of contention is that the CEO’s compensation has not been affected by the underperformance. Snowden received $99.3 million between 2020 and 2023.
According to Donnerail, Penn should have been investing in its regional brick-and-mortar properties instead of Las Vegas and the online sector. The firm says regional properties are more resilient to economic slowdowns. Donnerail called for the sale of the company, saying that a change in ownership would create significant value for shareholders. HG Vora likewise asserted in its letter that it believes PENN stock is trading below its true value due to concerns about its leadership and strategic direction.
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