Penn Settles Long-Running Fight With Activist Investor

Penn Entertainment will add three directors to its board to end a long-standing dispute with activist investor HG Vora Capital Management, an agreement that comes less than four months after Penn’s sports betting deal with ESPN went kaput.

As part of the “cooperation agreement” announced Monday, HG Vora also withdrew a lawsuit it filed against Penn in May in Pennsylvania federal court. The permanent dismissal of that suit did not seem guaranteed as recently as last week, when the two sides were actively arguing over the scope of the discovery process. The settlement comes just days ahead of Penn’s upcoming earnings call on Feb. 26.

The two sides have been sparring for a long time, having held at least 25 meetings or calls over the last two years, according to Penn. HG Vora wanted three board members of its choosing elected at Penn’s annual meeting last June; Penn agreed to add two of the directors but declined to nominate the other, saying there were only two seats open for election. Shareholders elected those two candidates, but HG Vora was not satisfied.

HG Vora owns a roughly 4.8% stake in Penn, which it says makes it “one of the largest shareholders.” It thinks Penn has plenty of potential—in fact, it believes the company “owns the best portfolio of geographically diverse regional casinos in the country.”

The activist’s main gripe was Penn’s underperformance in recent years, which it criticized as being a “direct result” of Penn’s strategic shift to invest heavily in online sports betting, including its more than $2 billion deal with Disney for the right to the ESPN Bet trademark for 10 years. Penn stock opened at $19.92 on Monday. Since reaching an all-time high of $136.47 on March 15, 2021—roughly two years before it announced the ESPN deal in August 2023—shares have been on a consistent downward trajectory.

In November, Penn and ESPN began winding down ESPN Bet roughly two years after its high-profile debut. ESPN changed gears and reached a deal with DraftKings to become the company’s exclusive sportsbook and odds provider.

Under the deal announced Monday, Penn is appointing to its board of directors Heather Ace, Jeffrey Fox, and Fabio Schiavolin. Ace is EVP for semiconductor chipmaker Qualcomm; Fox is CEO and founder of Arkansas-based investment firm Circumference Group; and Schiavolin is the former CEO of Snaitech, a public company in Italy that does business in the gaming and entertainment industry. As a result of their appointments, the board size will increase from 8 members to 11. 

The trio will receive the same amount of compensation as other non-employee directors. An April regulatory filing outlined the most recent compensation plan for non-employee directors: annual compensation of $50,000, plus an additional $10,000 for service on certain committees, and $5,000 for service specifically on the nominating and corporate governance committee. Non-employee directors also receive stock grants valued at $250,000.

Penn board chair David Handler said in Monday’s press release that the company is “pleased to welcome” the three new directors, calling them “highly accomplished individuals who each bring deeply relevant experience.”

HG Vora has previously gone after companies including Office Depot and international sports and betting company 888 Holdings. The activist successfully lobbied for a board refresh at Office Depot in 2022, while the outcome of the 888 campaign is not clear.

A representative for Penn declined to comment beyond the press release. A representative for HG Vora did not immediately respond to a request for comment.