Penn made it clear HG Vora will not win over the company’s shareholders without a fight.
Penn issued a letter to shareholders Thursday morning in an attempt to explain the dispute between it and the activist shareholder. It comes a day after HG Vora submitted their proxy statement, which tore into Penn for focusing more on its costly sports betting and online casino segment than its profitable regional casino business.
In the letter, Penn called HG Vora’s push a “blunderbuss campaign and reckless approach” and doubled down on the future profitability of its interactive segment.
“Over the course of our engagement, HG Vora has consistently (1) made demands of the Company that would have been value-destructive and that were short-sighted, short-term and self-serving in nature, (2) demonstrated flagrant disregard for the views and directives of state gaming authorities, and (3) rejected each of our reasonable offers to reach a mutually agreeable resolution.”
Penn will hold its 2025 annual meeting on June 17.
HG Vora’s suggestions detailed
Penn said HG Vora’s main plan was to “execute an approximately 50% leveraged buyback that would increase Penn’s debt to unstable levels.” According to Penn, HG Vora suggested that rent should not be considered as debt and told the company to “ignore lease-adjusted leverage metrics.”
HG Vora also allegedly suggested canceling or pausing retail growth projects in Illinois, Nevada and Ohio to fund the share repurchases.
The shareholder also made some suggestions that it is not allowed to make, Penn said.
“In a challenging M&A environment and while the business was gaining momentum, HG Vora also demanded PENN publicly announce a strategic review of the whole business and the Interactive segment – despite explicit direction from state gaming authorities that HG Vora was not permitted to seek provisions of this nature,” the letter said. “These short-sighted and self-serving proposals would destroy significant shareholder value while potentially helping HG Vora partially or fully exit its PENN position.”
Penn told to ‘limit engagement’
Penn’s letter said the HG Vora filing, which included its intention to nominate directors and push for changes, “directly violated its institutional investor waiver granted by state gaming authorities, which had allowed HG Vora to accumulate an 18.5% position in PENN.”
That led gaming regulators to inform both parties that HG Vora’s attempts to influence the company were “improper and impermissible.” Penn said it was also told to “limit engagement with HG Vora while its licensure was under review.”
HG Vora now owns about 4.8% of Penn, which puts it below licensing requirements.
Representatives from HG Vora did not return LSR‘s request for comment by publication.
Penn: casinos are transforming
Before breaking down what Penn thinks HG Vora has wrong, the letter first detailed how the company’s omnichannel strategy will deliver value.
The company pointed to 10% growth in its loyalty club members, its average customer age dropping 9 years to 44 and how 34% of its new online customers are within 50 miles of a Penn casino.
“As a result of the momentum underway in Interactive in both growth and profitability, we continue to expect the Interactive segment will generate positive adjusted EBITDA in the fourth quarter of 2025 and drive continued profitability in 2026 and beyond,” the letter said.
Interactive growth can pay down debt
Penn also noted that while its debt-to-EBITDA ratio, or leverage, has grown over the past two years, interactive’s growth is what will help pay down that debt.
“While our leverage has increased over the last two years as we made critical investments in our digital business, we have now reached a position in which we are well-equipped to rapidly deleverage our balance sheet as the Interactive segment approaches and achieves profitability,” the letter said.
A strengthened balance sheet can lead to capital returned to shareholders, which Penn said it hopes to accelerate in the second half of 2025. It also intends to buy back at least $350 million in stock this year.
Penn detailed HG Vora timeline
Conversations between Penn management and HG Vora representatives started “well before 2023,” but said this particular set of discussions started about a month after Penn signed the 10-year, $1.5 billion contract with Disney to use the ESPN brand.
Penn invited HG Vora to meet with the board on Sept. 19, 2023, and discussed strategy in a 90-minute conversation. At that time, HG Vora “expressed enthusiastic support” for the ESPN partnership.
The company even entered into a non-disclosure agreement with HG Vora, which allowed representatives to give input on the company’s earnings for one quarter.
But the timeline quickly jumps to the main issue, which began in 2025: HG Vora’s nomination of three directors and the subsequent lawsuit.
All HG Vora nominees interviewed
HG Vora put out a statement in January 2025 that condemned Penn’s “abject failure” in the interactive segment and suggested three director candidates the shareholder felt could help right the ship.
Those three nominees — Bill Clifford, Johnny Hartnett and Carlos Ruisanchez — were “promptly” included in Penn’s ongoing search for board members. The two sides then held eight meetings between March 25 and April 24 where Penn sought a “mutually agreeable resolution.”
On April 24, the company told HG Vora’s advisor that it would appoint Hartnett and Ruisanchez as directors, but HG Vora rejected that the next day.
According to Penn, HG Vora gave just two options: appoint all three nominees or appoint the two and give commitments concerning governance and strategic changes.
Clifford ‘unsuited’ for board
Penn decided Clifford, who served as Penn CFO until 2013, when he took the same position with gaming REIT Gaming & Leisure Properties through 2018, was not a good fit for the board.
Clifford volunteered for a board seat in 2020 but “was rejected based on an evaluation of his skills and experiences against the needs of the Board.” Penn reconsidered him following HG Vora’s suggestion, but Penn said he still was not a good fit and also “failed to demonstrate the base level of open-mindedness required of all directors in order to explore value-generating solutions.”
In his time at Penn, Clifford “advocated against key initiatives” like updating its IT and financial processes, creating a loyalty program and developing certain projects. It was CEO Jay Snowden, who was COO at the time, that “largely spearheaded” those changes after Clifford left.
“Mr. Clifford lacks digital gaming and online sports betting experience – areas essential to the future of PENN’s business and the industry – and his general experience is redundant with the significant real estate and financial expertise already represented on our Board,” the letter said.
