PENN nominates two HG Vora-backed candidates to board amid unresolved proxy fight, lawsuit
PENN Entertainment (NASDAQ: PENN) has nominated two director candidates, Johnny Hartnett (left on the featured image) and Carlos Ruisanchez (right on the featured image), proposed by activist investor HG Vora Capital Management, for election to its board at the upcoming June 2025 Annual Meeting. This development, detailed in a shareholder letter dated 14 May 2025, marks a turn in a heated proxy battle but falls short of resolving the conflict that has gripped the casino and gaming operator.
PENN Entertainment stated that this decision followed extensive discussions with HG Vora, involving over 25 meetings and calls, and a comprehensive evaluation process. The company acknowledged the potential contributions Hartnett and Ruisanchez could bring to its growth and strategic direction. However, these nominations were notably not part of a mutual settlement. PENN’s May 14 letter clarified that the nominations were made after HG Vora, on 25 April 2025, rejected a settlement offer from PENN that included appointing these two candidates. PENN subsequently decided to add Hartnett and Ruisanchez to the company’s slate later that same day.
This sequence of events suggests a manoeuvre by PENN Entertainment. By nominating two candidates favoured by the activist investor, even in the absence of a comprehensive agreement, PENN may aim to demonstrate responsiveness to shareholder concerns. The broader investment community could perceive this action as a willingness to refresh its board, potentially garnering support from other shareholders and casting HG Vora’s continued push for a third board seat in a different light.
Despite these nominations, HG Vora Capital Management, which holds approximately 4.8 percent stake in PENN Entertainment, remains undeterred. The activist investor continues to advocate for a third nominee and is actively pursuing legal action against PENN Entertainment.
PENN’s rationale and board refreshment
PENN Entertainment has framed the nomination of Johnny Hartnett and Carlos Ruisanchez as consistent with its ongoing commitment to shareholder engagement and a board refreshment initiative that commenced in 2020. The company stressed that if these nominees are elected, alongside recent retirements – with two incumbent directors stepping down and one having recently retired – 75 percent of its directors will have joined the board since 2019.
The company stresses its focus on identifying candidates possessing relevant expertise, particularly within the digital domain. PENN stated that it believed Hartnett and Ruisanchez bring “critical expertise and experience in the gaming industry, across both digital and retail” that align with the board’s priorities and the opportunities ahead. In its May 14 letter, PENN stated, “After engaging extensively with shareholders including HG Vora, our Board has nominated two of HG Vora’s nominees for election at the June 2025 Annual Meeting, while two incumbent directors will step down and one has recently decided to retire“.
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HG Vora’s fight for a third seat and legal challenge
HG Vora, which holds an approximate 4.8 percent stake in PENN Entertainment, has acknowledged PENN’s decision to nominate Hartnett and Ruisanchez. However, the activist investor remains resolute in its push for its third nominee, William J. Clifford, a former Chief Financial Officer of PENN National Gaming (PENN Entertainment’s previous name). HG Vora contends that Clifford’s “deep knowledge of Penn’s operations and expertise in M&A in the gaming industry make him particularly well-suited to challenge the board and management“. The investor has suggested that PENN’s reluctance to nominate Clifford stems precisely from his capacity to scrutinise board decisions rigorously.
Central to HG Vora’s ongoing campaign is a lawsuit filed on 7 May 2025, in the United States District Court for the Eastern District of Pennsylvania. The lawsuit challenges what HG Vora terms PENN’s “Board Reduction Scheme“. HG Vora alleges that PENN unlawfully reduced the number of board seats open for election at the 2025 Annual Meeting from three to two, a move made after HG Vora had already nominated its three candidates. The investor has characterised this action as a “brazen act of entrenchment” and a “desperate manoeuvre” designed to disenfranchise shareholders and protect incumbent directors. The lawsuit seeks a court order to compel PENN to allow shareholders the opportunity to vote on all three of HG Vora’s nominees.
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HG Vora continues to actively solicit support from fellow shareholders, urging them to vote for all three of its nominees—Clifford, Hartnett, and Ruisanchez—using its GOLD proxy card. In its 13 May 2025 letter to shareholders, HG Vora stated, “This election is about more than improving the board’s composition; it is about catalysing meaningful change at Penn. It is imperative that shareholders send a clear and unambiguous message that continued ineffective leadership, lack of accountability and entrenching actions will no longer be tolerated“.
The legal battle over the number of available board seats represents a critical juncture. A victory for HG Vora in court would enhance its potential to gain substantial influence on PENN’s board, as three new directors could form a considerable voting bloc. Conversely, if PENN prevails, HG Vora’s immediate impact on board composition would be limited to two seats. However, such an outcome would unlikely quell the underlying strategic disagreements and shareholder discontent, potentially leading to continued instability or further activist interventions. The core issues regarding PENN’s strategy and performance would persist regardless of the lawsuit’s resolution.
Also read: HG Vora vs. Penn Ent: Shareholder woes clash with casino’s claims – SigmaPlay
Mizuho cuts stock price target
Earlier this week, Mizuho Securities revised its estimate of PENN Entertainment Inc (NASDAQ:PENN), lowering the price target from $25.00 to $24.00. However, the company kept its “Outperform” rating on the firm’s stock intact. Based on InvestingPro data, PENN operates with a debt-to-equity ratio of 3.93. However, according to analysts, the company is expected to come back to profitability in 2025, with an EPS (earnings per share) forecast of $0.65. The broader analyst targets for the stock range between $16.50 and $30.00, implying upside from the current levels. The move came on the back of a review of PENN’s first quarter earnings, which had closely followed Mizuho’s expectations. The reported property EBITDA of $457 million was in line with the company’s expectation and slightly short of the overall market expectation of $463 million.
The shares of Penn Entertainment (PENN) were trading 2.60 percent lower at 15.76 USD apiece on Nasdaq as of 2:50 pm, 15 May 2025. The company’s stock price has fallen close to 20 percent in 2025, underperforming the Nasdaq Composite index, which has only fallen close to 1 percent in the year so far.
