For a gambling-industry event as hyped as any shareholders gathering since the historic PASPA decision, Penn Entertainment’s annual shareholder meeting on June 17 largely failed to bring the sizzle.
As expected, Penn shareholders elected Johnny Hartnett and Carlos Ruisanchez to the company’s board of directors as part of a continued reshuffling of the board. Their additions were sought by HG Vora Capital Management, a top Penn shareholder.
But Penn did not consider the nomination of William Clifford, a third independent director sought by HG Vora. Clifford’s nomination represents a key sticking point in contentious discussions regarding the future composition of the board.
At the conclusion of the 10-minute, 30-second meeting, Penn CEO Jay Snowden announced the election of Hartnett and Ruisanchez, based on the preliminary results of the vote. But without a resolution to Clifford’s nomination, the brief meeting ended on an anti-climactic note. As a court hearing in HG Vora’s lawsuit against Penn over board seats approaches next month, the meeting arguably produced more questions than answers.
Speaking on behalf of HG Vora, a New York-headquartered hedge fund, Mandy Lamb put forth Clifford’s nomination at the meeting. Clifford has deep experience with Penn, where he formerly served as the company’s chief financial officer for nearly 13 years. He left the company in November 2013, seven years before Snowden’s appointment as CEO, to join Gaming Leisure and Properties.
Snowden abruptly dismissed Lamb’s proposal, immediately quashing any possibility for the election of a third director. Pursuant to Penn company bylaws, the board set the number of Class II directors at two, Snowden stated. He deemed a proposal to nominate a third director as “out of order” and not permissible.
The proxy battle on board composition has been the subject of an intense months-long dispute between Penn and the hedge fund. After his departure, Clifford subsequently interviewed with Penn for a position on the board in 2020.
Penn indicated that it still has some of the same concerns on Clifford’s expertise in digital gambling that it raised five years ago. In a May letter to shareholders, Penn asserted that Clifford lacked digital gaming and online sports betting experience, areas that are “essential to the future” of its business.
In May, HG Vora filed a lawsuit against Penn accusing the company of violating Pennsylvania Business Corporation law. The suit also accuses Penn of breaching its fiduciary duty by reducing the number of seats available on the board. In response, Penn filed a motion to stay, urging a Pennsylvania court to temporarily halt legal proceedings. According to Penn, the merits of HG Vora’s claim do not “constitute good cause.”
In addition, Penn argued that the plaintiffs have not established the likelihood of “imminent and irreparable harm.” There, Penn addressed HG Vora’s arguments on board composition. Speculation about a future board action cannot constitute “good cause,” Penn contends. A speculative matter is not even a dispute ripe for adjudication, Penn added, because it rests upon contingent future events that may not occur as anticipated, or may not occur at all.
Penn also criticised HG Vora for its failure to abide by disclosure standards in other instances. The Securities and Exchange Commission announced a $950,000 settlement with the fund in March 2024 for its failure to make timely ownership disclosures in the lead-up to a May 2022 acquisition bid for trucking fleet company Ryder System Inc.
According to the SEC, HG Vora disclosed that it owned 5.6 percent of Ryder’s common stock as of Dec. 31, 2021 and certified that it did not have a control purpose. The fund subsequently built its position to a 9.9 percent stake in the first half of 2022 and formed a control purpose in May of that year. However, HG Vora did not make the proper disclosures until 13 May 2022, the same day it made a proposal to buy all of Ryder’s shares for $86 a share, a sizable premium over the trading price.
Ahead of the meeting, HG Vora urged shareholders to vote using its “gold card,” which featured the nominations of all three directors. By noon, more than 55 percent of all votes cast in the election were submitted on the gold cards, HG Vora wrote in a statement.
At the same time, HG Vora claimed that approximately five of Penn’s top 30 institutional investors voted on the company’s white proxy card, based on preliminary tabulations from the fund’s proxy solicitor, Okapi Partners.
“Penn’s shareholders have voted overwhelmingly for genuine change, including for the election of William Clifford to the board,” said Parag Vora, founder of HG Vora. “There can be no mistake about the mandate from Penn’s shareholders that the status quo is simply unacceptable.”
