HG Vora files lawsuit to protect shareholder elections against PENN

On May 7, 2025, in the United States District Court for the Eastern District of Pennsylvania, HG Vora Capital Management, LLC, along with its affiliates, initiated legal action against PENN Entertainment, Inc. The lawsuit alleges that the corporation violated the state’s Business Corporation Law and that the Board of Directors breached their fiduciary responsibilities when they altered the election process for the upcoming Annual Meeting of Shareholders by reducing the number of available director seats from three to two. This modification, termed the Board Reduction Scheme, raises concerns about shareholder rights and the integrity of the election process. The complaint seeks declaratory and injunctive relief, asserting that the Board Reduction Scheme is unlawful and demanding that PENN rectify misleading statements in its proxy materials. Furthermore, the lawsuit aims to reestablish the opportunity for shareholders to elect all three independent nominees proposed by HG Vora: William J. Clifford, Johnny Hartnett, and Carlos Ruisanchez. HG Vora argues that this manipulation of election rules primarily serves to benefit incumbent directors, particularly the Chairman and CEO, which undermines the essence of shareholder democracy. In connection to the Annual Meeting, HG Vora has also filed a preliminary proxy statement with the Securities and Exchange Commission (SEC) to solicit support for its slate of nominees. As of April 24, 2025, HG Vora held approximately 4.80% of the outstanding shares of PENN, emphasizing their significant vested interest in the company’s leadership and governance. The lawsuit and proxy activities underscore ongoing tensions between shareholders seeking to influence corporate governance and management teams aiming to maintain control over board composition. This situation comes amidst a broader dialogue surrounding shareholder rights and the ethical obligations of corporate boards. The allegations against PENN raise critical questions about the extent to which companies can modify election rules and processes to favor existing management. The developments following this lawsuit will be closely monitored by investors and regulatory bodies alike, as they may influence governance practices and shareholder engagement strategies, not only at PENN but across the corporate sector. The stakes are high as the company prepares for its 2025 Annual Meeting, where these issues will be front and center.