PENN Entertainment is being sued by shareholder HG Vora Capital Management after reducing the number of seats on its board of directors.
PENN Entertainment made the change in late April when it nominated Johnny Hartnett and Carlos Ruisanchez to the board.
Both Hartnett and Ruisanchez were proposed by HG Vora, alongside a third independent director, William Clifford.
The complaint alleges that PENN violated Pennsylvania’s Business Corporation Law, and that the board breached its fiduciary duties, when it reduced the number of seats up for election at the upcoming annual general meeting of the company from three to two.
The complaint also alleges that PENN violated federal securities laws by failing to abide by universal proxy rules and making materially false and misleading statements and omissions in proxy materials filed with Securities and Exchange Commission (SEC).
HG Vora states in the court filing that it nominated three highly qualified independent directors to the board of PENN in order to address what it sees as ongoing mismanagement and underperformance related to the company’s iGaming strategy.
“Recognising the serious threat that the Independent Nominees posed to the Director Defendants’ hold over the Company, on April 25, 2025, the Director Defendants responded by purporting to shrink the size of the Board by one seat, claiming that only two of the three Independent Nominees can stand for election,” HG Vora states in the complaint.
“Defendants proceeded to select which two Independent Nominees should serve on the Board. Those actions violated core shareholder rights by enabling Defendants to avoid a contested election for the third open seat and entrench their control of the Board.”
The investment firm describes the April 25 announcement by PENN as a false and highly misleading press release that gave the false impression that PENN’s actions were based on an agreement with HG Vora.
“The primary purpose of the Board Reduction Scheme was to make it more difficult for a shareholder to nominate director candidates for election to the Board, thereby minimizing any influence the shareholder and its nominees, once elected, could have over the direction of the Company,” HG Vora explains.
“Because only three of PENN’s nine Board seats are up for election in a given year, it takes, at a minimum, two annual meeting cycles to change over a majority of the Board. By attempting to reduce the number of seats up for election to two, Defendants have greatly enhanced the chances that two years becomes three, or even more.”
HG Vora is seeking a declaration to invalidate the board reduction scheme, as well as injunctive relief ordering PENN to correct the “materially false and misleading” statements in their proxy materials.
Shares in PENN Entertainment Inc. (NASDAQ:PENN) closed 1.22 per cent higher at $15.71 per share in New York Wednesday.