PENN shareholder puts forward three candidates for the board following ‘abysmal track record’
HG Vora Capital Management, one of the largest shareholders in PENN Entertainment with 4.8 per cent of the company’s shares, has slammed the performance of the operator and has called on shareholders to vote for HG Vora’s nominees to send a clear message to PENN’s Board that change is needed.
HG Vora has put forward three candidates — William Clifford, Johnny Hartnett and Carlos Ruisanchez — who are independent of both the company and HG Vora for election at the Annual Meeting. Each candidate has a track record of success in the gaming and hospitality industry, and we believe each will pursue all opportunities to deliver enhanced value to PENN shareholders.
It said: “PENN’s stock has underperformed those of its publicly traded gaming peers over the last two, three, four, five, six, seven, eight, nine and ten years, and during the tenure of the company’s CEO and most of the independent directors. In our view, this is the direct result of an unsuccessful strategic shift that has been plagued by value-destructive deal-making, reckless capital allocation and poor execution. We believe PENN trades at a discount to its intrinsic value because its management team and Board of Directors have lost credibility and investors fear further value-destructive decisions.
“Surprisingly, it seems that the Board thinks PENN’s performance has been laudable. In the Company’s proxy statement, for example, the Board claims that there has been a ‘substantial increase in shareholder value… over the last decade.’ That is simply not true. PENN’s stock price has declined over the last ten years. Despite the Company’s severe and objective underperformance, the Board appears unwilling to accept responsibility for its failures. Instead, it has taken extraordinary measures to avoid accountability and disenfranchise shareholders.”
“But perhaps the most brazen act of entrenchment was the Board’s last-minute move to reduce the number of directors up for election at the 2025 Annual Meeting of Shareholders from three to two, after we had properly nominated three director candidates. The Board did so just ten days after declaring to us there were three seats up for election. We believe this desperate maneuver 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.”
“We believe shareholders should not tolerate such a manipulation of the electoral process, nor should they continue to accept PENN’s dismal performance. Shareholders deserve a Board that welcomes their input, is dedicated to serving their interests, is committed to holding management accountable and is open to all avenues for maximizing value.”
“Despite prolific spending, we believe that PENN’s online sports betting strategy has failed. Nearly two years after Mr. Snowden announced that the company was targeting double-digit market share and a ‘podium position,’ ESPN Bet is the 8th-ranked online sports betting platform in the US, with its market share hovering around two per cent. Additionally, by nearly all relevant measures, the company is less profitable and less valuable than it was before the Company embarked on its digital transformation. Earnings, Adjusted EBITDAR, return on invested capital and free cash flow have all declined over the last five years, while the Company’s share count and leverage have increased significantly.”
PENN’s executives — especially Mr. Snowden — have been lavishly rewarded by the Board. While PENN’s market value has declined by approximately $11bn since the beginning of 2021, Mr. Snowden has been paid more than $120m.
Despite PENN’s abysmal track record during his tenure, Mr. Snowden is now the second highest-paid CEO among his peers after the company rewarded him with a greater than 70 per cent increase to his target compensation in 2024.
HG Vora added: “We believe that fair elections are the cornerstone of corporate democracy. We have therefore commenced litigation against the Company to ensure that shareholders have the opportunity to elect all three HG Vora-nominated candidates at the Annual Meeting.”
PENN rseponded: “Over the course of our engagement, HG Vora has consistently made demands of the Company that would have been value-destructive and that were short-sighted, short-term and self-serving in nature, demonstrated flagrant disregard for the views and directives of state gaming authorities, and rejected each of our reasonable offers to reach a mutually agreeable resolution. Given these actions, we believe HG Vora is intent on ensuring all three of its candidates are appointed to the Board, regardless of their suitability and qualifications, and despite only two seats being available for election at this year’s Annual Meeting – all at the expense of the Company and its shareholders.”
“Despite saying it has ‘deep experience investing in the gaming sector,’ HG Vora’s primary strategic direction was to strongly advocate for PENN to execute an approximately 50 per cent leveraged buyback that would increase PENN’s debt to unstable levels and limit PENN’s ability to pursue growth investments at the time. HG Vora urged PENN to cancel or pause retail growth projects at Aurora and Joliet, Illinois, Columbus, Ohio and Henderson, Nevada – which would have limited our ability to invest in these communities, particularly with regard to labor. In a challenging M&A environment and while the business was gaining momentum, HG Vora also demanded PENN publicly announce a strategic review of the whole business and the Interactive segment – despite explicit direction from state gaming authorities that HG Vora was not permitted to seek provisions of this nature. These short-sighted and self-serving proposals would destroy significant shareholder value while potentially helping HG Vora partially or fully exit its PENN position.”
“Mr. Clifford had previously volunteered for a PENN Board seat in 2020, and this offer was rejected based on an evaluation of his skills and experiences against the needs of the Board. Mr. Clifford lacks digital gaming and online sports betting experience – areas essential to the future of PENN’s business and the industry – and his general experience is redundant with the significant real estate and financial expertise already represented on our Board.”
