HG Vora challenges PENN’s board election process

NEW YORK - Investment firm HG Vora Capital Management, LLC has filed a legal complaint against PENN Entertainment, Inc. (NASDAQ:PENN) and its Board of Directors, alleging violations of Pennsylvania’s Business Corporation Law and breaches of fiduciary duties. The complaint, lodged in the United States District Court for the Eastern District of Pennsylvania, centers on PENN’s decision to reduce the number of director seats available for election at its 2025 Annual Meeting of Shareholders from three to two.

The reduction, which HG Vora refers to as the "Board Reduction Scheme," took place amid a contested election and is characterized by HG Vora as a self-serving action without legitimate corporate purpose. The firm contends that this maneuver is detrimental to shareholder democracy and benefits incumbent directors, particularly the Chairman and CEO. According to InvestingPro analysis, PENN’s financial health score is rated as "FAIR," with particularly concerning metrics including a current ratio of 0.82, indicating short-term obligations exceed liquid assets.

HG Vora’s complaint also accuses PENN of violating federal securities laws by failing to comply with universal proxy rules and making false and misleading statements in proxy materials submitted to the Securities and Exchange Commission (SEC). The investment firm is seeking injunctive relief to invalidate the Board Reduction Scheme, compel PENN to amend its proxy materials, and allow shareholders the opportunity to elect three independent nominees proposed by HG Vora to the Board.

The nominees in question are William J. Clifford, Johnny Hartnett, and Carlos Ruisanchez, whom HG Vora believes are necessary to restore accountability and consider all options to maximize shareholder value.

The investment firm, which holds approximately 4.80% of PENN’s outstanding common stock, has already filed a preliminary proxy statement with the SEC. HG Vora is urging shareholders to review the complaint thoroughly and to consult its definitive proxy materials upon their availability.

The information provided by HG Vora contains forward-looking statements, which are subject to risks, uncertainties, and assumptions. The firm cautions that these statements should not be seen as guarantees of future performance and advises shareholders to consult the proxy statement and other materials for important information. Looking ahead, analysts maintain a cautiously optimistic outlook, with InvestingPro data showing consensus expectations for profitability this year and a revenue growth forecast of 7% for FY2025. Subscribers to InvestingPro can access the full detailed analysis, including 8 additional key ProTips and a comprehensive Pro Research Report available for PENN among 1,400+ US stocks.

This news article is based on a press release statement.

In other recent news, PENN Entertainment Inc. has been the focus of several analyst updates and corporate developments. Canaccord Genuity adjusted its outlook on PENN Entertainment, lowering the stock’s price target to $26 while maintaining a Buy rating, citing a stall in growth for its ESPN BET operations. Meanwhile, Mizuho Securities raised its price target to $25, maintaining an Outperform rating, driven by strong February operations and anticipated asset openings. Analysts at Raymond James reiterated a Market Perform rating, noting the company’s ongoing challenges in achieving digital profitability, while Benchmark maintained a Hold rating, highlighting mixed performance in the fourth quarter of 2024.

In a move to strengthen its leadership, PENN Entertainment announced the nomination of Johnny Hartnett and Carlos Ruisanchez to its Board of Directors, following the retirement and non-reelection of three current board members. This decision came after discussions with HG Vora Capital Management, with the company expressing gratitude for their input. Additionally, PENN Entertainment is set to launch several new facilities and expand into the Alberta market, with a focus on reducing losses in its Interactive segment.

The company’s strategic initiatives include the launch of a standalone Hollywood iCasino in multiple states and a $350 million share buyback program, signaling confidence in its future prospects. PENN’s management has shown adaptability, indicating a willingness to adjust its ESPN BET platform based on market trends. Investors will be closely monitoring these developments, particularly the company’s efforts in digital expansion and market share growth.

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