Penn Entertainment faces a lawsuit from HG Vora Capital Partners, who allege the company violated rules regarding board changes.
Rewritten Article:
Following a disagreement over board seats, New York-based investment firm HG Vora Capital Management has lodged a formal complaint against Penn Entertainment. The dispute revolves around Penn's plans to shrink its board of directors, which HG Vora claims is a violation of shareholder rights and state and federal securities laws.
In April, Penn announced several changes to its board, including the nomination of two candidates from HG Vora—Johnny Hartnett and Carlos Ruisanchez—for seats. Meanwhile, Ron Naples retired, while Barbara Shattuck Kohn and Saul Reibstein opted not to stand for re-election. With eight directors remaining, seven of whom were independent, the scene was set for three seats to be up for election.
However, things took a turn when Penn decided to reduce the number of available seats to just two. This move frustrated HG Vora, as it had previously stated its intention to nominate three individuals for these seats. The reduction, HG Vora argued, would mean the exclusion of one of its nominees, William Clifford.
As a result, HG Vora filed a preliminary proxy statement with the Securities and Exchange Commission (SEC). It also urged shareholders to review its definitive proxy materials when they become available.
Now, HG Vora has escalated the situation by filing a legal complaint in court. The lawsuit accuses Penn of violating Pennsylvania Business Corporation Law and breaching its fiduciary duties by reducing the number of seats up for election. Furthermore, it alleges that Penn violated federal securities laws by failing to abide by universal proxy rules and making "materially false and misleading statements" in proxy materials filed with the SEC.
According to HG Vora, the board reduction scheme is a self-serving move with no legitimate corporate purpose, aimed at protecting incumbent directors. The investment firm believes the proposed changes are an affront to shareholder democracy and could negatively impact the company's accountability and ability to maximize shareholder value.
HG Vora is seeking declaratory and injunctive relief, hoping to invalidate the board reduction scheme, correct misleading information in proxy materials, and allow shareholders to elect all three of its nominees. The firm, which holds approximately 4.80% of Penn's shares, emphasizes the importance of preserving shareholder rights ahead of the 2025 Annual Meeting of Shareholders. The case's outcome could have significant implications for Penn's governance and market perception.
- CEO Carlos Ruisanchez, one of HG Vora's nominated board members, is entangled in the dispute between HG Vora and Penn Entertainment, with HG Vora claiming Penn violated their shareholder rights and securities laws.
- In the midst of the legal complaint filed by HG Vora, it has been alleged that Penn Entertainment breached its fiduciary duties and violated both federal securities laws and Pennsylvania Business Corporation Law by reducing the number of board seats available for election.
- As the case between HG Vora and Penn Entertainment unfolds, the investment firm has made it clear that it intends to seek declaratory and injunctive relief, aiming to invalidate the board reduction scheme, correct misleading information in proxy materials, and allow for the election of all three of HG Vora's nominees in the upcoming 2025 Annual Meeting of Shareholders, safeguarding the importance of shareholder rights and potentially shaping Penn's future governance and market perception.
