HG Vora sues Penn Entertainment, alleging illegal board reduction
Activist investor HG Vora Capital Management, LLC, on Wednesday, escalated its proxy contest with Penn Entertainment, Inc. (Nasdaq: PENN) by filing a lawsuit against the casino operator and its Board of Directors, challenging the company’s recent move to reduce the number of director seats available in the upcoming election.
Federal court challenge
The complaint was lodged in the United States District Court for the Eastern District of Pennsylvania on 7 May 2025. It directly targets Penn’s decision to decrease the number of board seats up for election at the 2025 Annual Meeting from three to two, a move HG Vora has termed the “Board Reduction Scheme.”
Also read: HG Vora vs. Penn Ent: Shareholder woes clash with casino’s claims – SigmaPlay
Core allegations against Penn and its board
HG Vora’s lawsuit outlines several serious accusations:
- Violation of state law: The primary claim is that Penn’s reduction of elective seats violates Pennsylvania’s Business Corporation Law.
- Breach of fiduciary duties: The complaint alleges that Penn’s Board of Directors breached its fiduciary duties to shareholders through this action.
- Federal securities law violations: HG Vora also contends that Penn violated federal securities laws by failing to adhere to universal proxy rules and by disseminating materially false and misleading statements and omissions in its proxy materials filed with the Securities and Exchange Commission (SEC).
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Relief sought
The activist investor is seeking specific remedies from the court:
- Declaratory and injunctive relief: HG Vora wants the court to declare Penn’s board reduction invalid.
- Corrected proxy materials: The lawsuit demands that Penn be ordered to issue corrected proxy statements.
- Election of three directors: Crucially, HG Vora seeks to ensure shareholders have the opportunity to elect all three of its independent director nominees: William J. Clifford, Johnny Hartnett, and Carlos Ruisanchez.
HG Vora decries “self-serving” manoeuvre
In a statement, HG Vora described the board seat reduction as a “self-serving action with no legitimate corporate purpose,” particularly implemented as the Board faced the prospect of losing three seats in a contested election. HG Vora stated its belief that “the Board’s manipulation of the Company’s election rules is an affront to shareholder democracy and only benefits its incumbent directors, notably its Chairman and CEO.“
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Escalation in contentious proxy battle
This lawsuit marks a significant escalation in the ongoing battle for influence at Penn Entertainment. HG Vora has been publicly campaigning for substantial changes at the company, citing concerns over its strategic direction, capital allocation—especially regarding its interactive division—and prolonged underperformance in shareholder returns.
HG Vora confirmed it has filed a preliminary proxy statement with the SEC in connection with Penn’s Annual Meeting, which is scheduled for 17 June 2025. The firm urges shareholders to review the full complaint and its forthcoming definitive proxy materials. This legal challenge aims to preserve what HG Vora describes as “the fundamental right of shareholders to elect all three of its highly qualified independent directors.”
Penn Entertainment shares surged close to 3 percent to an intraday high of $15.98 as of afternoon trade on Wednesday.
