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A major investor in Penn Entertainment is moving forward with a proxy campaign to install its picks for Penn’s board of directors, despite Penn’s announcement that it would the nomination of two of the investors’ three picks. The investor, a hedge fund called HG Vora Capital Management, has criticized Penn’s decisions regarding its online gambling business.
If HG Vora gets from shareholders, it could control as much as one-third of the seats on Penn’s board, giving HG Vora tremendous influence over the company’s future. That might mean significant changes for Penn’s existing online gambling presence and a deviation in the company’s strategy for that division moving forward.
HG Vora pushing for major presence on Penn’s board
Penn’s attempts to satiate HG Vora so far have not been sufficient to stem off a proxy fight over board elections. HG Vora controls nearly 5% of the total shares in Penn.
Svea Herbst-Bayliss of Reuters reports that HG Vora “plans to push ahead…and elect all three of its director candidates.” Christopher Palmeri reported for Bloomberg that discussions between HG Vora and Penn resulted in Penn agreeing to the candidacies of two of HG Vora’s three picks.
Herbst-Bayliss added that Penn intends to shrink the size of its board by one seat. In response, HG Vora claimed that the reduction “has no legitimate corporate purpose and deprives shareholders of their fundamental right to elect directors of their choosing.”
At the center of the dispute between HG Vora and Penn is Penn’s interactive division and the future of that segment of the business.
Future of ESPN Bet, Hollywood online casino at stake
Palmeri points out that “HG Vora…has said Penn squandered nearly $4 billion trying to crack the online sports betting market.” That’s a reference to Penn’s acquisition of The Score, licensing of ESPN for its online sportsbook, and Penn’s acquisition then sale of Barstool Sports.
Through all those expenses and continuing to the present time, Penn’s market share for online sports wagering in multiple United States jurisdictions has remained small. Penn has taken actions like separating ESPN Bet from its iGaming platform, Hollywood online casino, in multiple states.
Penn’s share of the iGaming market in its current addressable market has been better than its share of online sports wagering. For example, March continued a trend of growth for Hollywood in Michigan.
That might be where Penn focuses its energies in the future, especially if three of the nine spots on its board are HG Vora picks. For ESPN Bet, though, that sequence of events playing out could mean much more substantial changes.
Penn has an option to make an early exit of its licensing deal with ESPN in 2026. Doing so could introduce a significant cost savings as the company devotes resources to other segments of its business, something that HG Vora has been advocating for.
The shareholder vote on whether to shrink the board and how many HG Vora picks will take seats on the board will signal the future of ESPN Bet and Hollywood. So far, it seems HG Vora and Penn are still divided on what that future should look like.
