ESPN Bet owner Penn Entertainment claims activist investor HG Vora is “refusing to take yes for an answer” in its dispute over the operator’s upcoming board elections.
The latest phase of the argument comes amid a lawsuit filed by hedge fund HG Vora to allow shareholders to elect three new members instead of two to Penn’s board.
In a motion to stay filed Tuesday, Penn accused HG Vora — its third-largest investor — of engaging in a “make-believe” fight over a board seat that “does not exist.”
“At next month’s annual meeting, the shareholders of Penn Entertainment, Inc will elect two new directors to the two open seats on the Company’s board of directors,” the motion said. “Not one of the company’s incumbent directors will be re-seated. Both of the new directors were proposed by plaintiffs in this litigation — affiliates of the activist hedge fund HG Vora.
“But, refusing to take yes for an answer, plaintiffs have brought this litigation to ask the court to create another seat on the board that does not now exist and to transform an uncontested director election into a contested one to justify the make-believe (and value-destructive) proxy fight plaintiffs have been waging against PENN.”
HG Vora sees ESPN Bet as ‘complete failure’
The dispute over board seats forms part of a larger fight over the future of Penn, and in particular its digital strategy.
Vora sees Penn’s attempts to get involved in sports betting — first through Barstool Sportsbook and now with ESPN Bet — as a “complete failure” and hopes the operator will stop devoting resources to that vertical. Penn has spent billions on acquisitions and marketing tie-ups for its sports betting division, but has struggled to earn significantly more than a 3% market share or approach profitability.
HG Vora also wants Penn to increase its returns to shareholders via a share buyback and is extremely critical of chief executive Jay Snowden, who the fund sees as “overpaid.” Snowden’s total compensation package last year was $26.7 million compared to $15.5 million in 2023.
Seeking to exert greater influence over the business, HG Vora sought to elect three new directors to Penn’s board — Johnny Hartnett, Carlos Ruisanchez, and William Clifford.
While Penn agreed to put Hartnett and Ruisanchez up for election, it did not do the same for Clifford. Instead, the operator announced that it was shrinking the size of its board from nine seats to eight.
HG Vora argues this decision violates the Penn board’s fiduciary duty to shareholders. It has called Penn’s decision a “manipulation of the electoral process” and warns that it could make further changes to prevent shareholders from having a say, such as expanding the board again — with a candidate of its own choosing — after elections have been completed.
Last Wednesday, HG Vora filed a motion for an expedited trial. It added that it didn’t want an injunction to stop the annual meeting from being held, as this could prevent it from being able to nominate any members.
Penn seemed to take this as evidence that HG Vora was no longer seeking an injunction to have Clifford elected. However, HG Vora says it is still pursuing this injunction and is attempting to solicit proxy votes for Clifford in the hopes that a court allows them to be counted.
The annual meeting takes place on June 17.
As the fight continues, Penn shares have struggled. They lost as much as 2.5% Wednesday morning, hitting $14.82 before a slight recovery. They remain down more than 7% so far this week.
