The ongoing legal dispute between PENN Entertainment and activist investor HG Vora is far from reaching a conclusion, as it has been placed on hold with no expedited ending in sight.
HG Vora sued PENN in the Eastern Pennsylvania District Court, accusing the entertainment and gaming conglomerate of violating the law for not notifying shareholders before it removed one of the open board of directors seats that were up for election.
PENN was expected to have three of the nine seats available for election at the 2025 company meeting but the third seat was no longer available after a board director retired.
Earlier this year, HG Vora filed a motion for expedited trial and an early case management conference, which was denied by U.S. District Court Judge Catherine Henry. In response, PENN filed a motion to stay while a special litigation committee (SLC) investigates the issue. The motion was granted in part by Henry putting a 30-day pause in the case while the SLC investigates with a status update expected no later than Aug. 1.
“Under bedrock Pennsylvania law, fiduciary duties run only to the company—not individual shareholders—and claims of breach thus belong to and are controlled by the corporation itself,” said PENN in its motion to stay. “Pennsylvania’s Business Corporation Law expressly empowers corporations to vest control of such litigation in the hands of a special litigation committee, and the statute provides for a mandatory stay of any shareholder-filed litigation to allow such a committee time to complete its work.”
HG Vora first voiced its opposition to PENN’s business practices in 2024 by notifying the Securities and Exchange Commission of its concerns over PENN’s “underperformance.”
HG Vora also notified the SEC of its request to have a representative sit on PENN’s board as it held an 18.5% stake in the company. In its suit, HG Vora voices concerns of PENN being too focused on its digital arm, underwhelming media acquisitions and the CEO’s salary.
Earlier this year, HG Vora launched a website to promote its displeasure with PENN. The website hosts a 116-page investor presentation on how PENN is mismanaged.
The presentation also calls for new board leadership at PENN.
PENN approves two new board members
Last month, PENN elected two shareholders backed by HG Vora to its board despite the activist investor nominating three shareholders. At an annual shareholders meeting, PENN confirmed independent director nominees Johnny Hartnett and Carlos Ruisanchez. Independent proxy advisory firm Glass Lewis supported the two board confirmations.
The third shareholder HG Vora nominated but was not elected was William Clifford. HG Vora, a New York-based investment company, is PENN’s third-largest shareholder.
