Vora Accused by Penn, Alleges Investment Infraction of State Gaming Regulations
Posted: May 15, 2025, 03:49h.
Last Updated: May 15, 2025, 03:49h.
Todd Shriber @etfgodfatherRead More Financial Gaming Business Mergers and Acquisitions
Head-butting at Penn: HG Vora accused of bending rules, shooting for board shake-up
Hedge fund attempts power play, demands companywide reviewBoard expects potential buyback would debt Penn to the brink
In a heated letter to shareholders, Penn Entertainment's (NASDAQ: PENN) board of directors lobbed accusations at activist investor HG Vora for allegedly diving into murky legal territory to gain influence, including demanding a whopping 50% shares buyback that could've sunk the company in debt.
Just two days after HG Vora declared open season on Penn, the hedge fund found itself on the receiving end of some hard-hitting allegations, with Penn's board claiming Vora skirted state gaming regulations in an attempt to muscle its way onto the gaming company's board. When HG Vora took a chunky stake in Penn in late 2023, it owned 18.5% of the shares—a stake that has since shrunk to about 4.8%, nimbly evading the requirement to obtain gaming permits in multiple states.
HG Vora's underhanded maneuvers didn't fly with state gaming regulators, who were quick to warn both parties that the hedge fund's power play, including nominating directors, was off-limits.
Leaving Clifford Out in the Cold
In January, Vora proposed William Clifford, Johnny Hartnett, and Carlos Ruisanchez to Penn's board. These candidates were seen as sound choices, but Penn still rejected Clifford. The directors spilled the beans today, citing an evaluation of Clifford's skills and experiences against the board's needs, and his objections to technological changes championed by CEO Jay Snowden in his previous stint at Penn as the reasons for his rejection.
Despite this, Penn was willing to reconsider Clifford, who brings three decades of gaming industry experience, including a high-profile stint as CFO at Gaming and Leisure Properties (NASDAQ: GLPI), the real estate investment trust spun out of Penn in 2013. However, his lack of "open-mindedness" during the interview process left the board unconvinced.
HG Vora's wish list: Buybacks, Strategic Reviews, and more
Aside from Clifford's candidacy, Penn's board also revealed that HG Vora clamored for a company-wide strategic review and a humongous shares buyback. The buyback proposal, if executed, would have swollen Penn's debt to unmanageable levels, according to the board. To cover the cost of this ambitious plan, Vora proposed halting investment projects at several regional casinos, including ones in Illinois, Ohio, and Henderson, Nevada.
Other dissatisfied investors have also suggested strategic reviews, but regulators have consistently nixed those ideas due to potential risks to the company's operations and finances.
Wall Street rumblings and a dance with Boyd Gaming
Rumors bubbled up last June that Boyd Gaming (NYSE: BYD) was eyeing Penn's land-based casino assets, but both parties remained tight-lipped, with analysts speculating that even if Penn was on the auction block, complexities would arise because the deal would need to be divided between buyers for Penn's brick-and-mortar assets and another for the struggling ESPN Bet unit.
Meanwhile, HG Vora's moves leave Penn Entertainment’s board and management team bracing for a game of cat and mouse. Penn's board remains steadfast in its rejection of HG Vora's strategies, vowing to protect shareholder value while navigating the hedge fund's relentless pursuit for influence.
- Despite HG Vora's push for a large-scale financial maneuver, such as a company-wide strategic review and a substantial shares buyback, the board of Penn Entertainment cautioned that such moves could potentially drive the company into unmanageable debt in the financial sector.
- The intense battle for power between Penn Entertainment and HG Vora extends to the legal landscape, with the hedge fund facing accusations of bending gaming regulations to gain influence and avoid obtaining gaming permits in multiple states, a requirement in the legal finance sphere.
- As Penn Entertainment navigates this financial and legal storm instigated by HG Vora, the company's focus on nurturing open-mindedness in potential board members, such as William Clifford, who brings three decades of gaming industry experience, has become crucial in the business sector, especially when dealing with investors and regulatory agencies.
