Proxy Battle at PENN Entertainment: Activist Pressure or Path to Value Creation?

Isaac LaneTuesday, May 13, 2025 10:52 pm ET
52min read

The proxy war between HG Vora Capital Management and

has escalated into a defining moment for the gaming giant. At stake are governance reforms, strategic pivots, and billions in shareholder value. As the June 17 shareholder meeting looms, investors must decide: Is this a catalyst to unlock PENN’s latent potential or a distraction from its core strengths?

HG Vora’s Case: Governance Failures and Strategic Missteps

HG Vora’s campaign hinges on PENN’s governance failures and operational missteps. The firm accuses the board of squandering $4.3 billion on value-destructive acquisitions, including Score Media ($2.1B) and Barstool Sports ($550M), which have contributed to cumulative EBITDAR losses of over $1.2B since 2021. The ESPN Bet deal—priced at over $2B—has also underwhelmed, securing just 2% U.S. market share.


The data underscores HG Vora’s point: PENN’s shares have declined by ~50% over the past decade, underperforming peers by 30+ percentage points. Meanwhile, CEO Jay Snowden’s compensation has risen 70% since 2021 despite this underperformance, earning a -100 “misalignment” rating from ISS.

HG Vora’s nominees—William Clifford, Johnny Hartnett, and Carlos Ruisanchez—represent a stark alternative. Clifford, PENN’s former CFO, delivered 23% annual shareholder returns during his tenure, outperforming peers. His exclusion from the ballot after the board reduced director seats from three to two has become a focal point of the campaign.

PENN’s Defense: Digital Transformation and Shareholder Value

PENN argues its pivot to a “sports-tech conglomerate” is a long-term play. It defends its acquisitions as investments in growth, citing ESPN Bet’s “inflection point” in 2026 and a path to profitability for its Interactive segment. The board also points to its own refreshment, agreeing to nominate two of HG Vora’s candidates while removing three entrenched directors.

Financially, PENN’s leverage ratio (3.8x net debt/EBITDA) is manageable, though higher than peers like Caesars (3.0x) or MGM (2.4x). Free cash flow remains pressured by digital losses, but the company holds $1.2B in liquidity. PENN’s argument is that its current strategy, while costly, will pay off as digital adoption accelerates post-pandemic.

Strategic Implications: Core Assets vs. Digital Gambles

The crux of the battle lies in strategic focus. HG Vora insists PENN should return to its core strengths—its geographically diversified casinos and omni-channel retail—while shedding underperforming digital assets. This could free up capital for deleveraging, dividends, or share buybacks.

Consider the math: If PENN sold non-core assets at a 5x EBITDA multiple (vs. its current 6.2x EV/EBITDA), it could generate $2–3B in proceeds. Redirecting capital to shareholder returns at its current $10B market cap would unlock meaningful value.


PENN’s valuation is already at a discount to peers, suggesting markets have priced in risks. A successful activist push could narrow this gap, especially if asset sales or cost cuts improve margins.

The Investment Decision: Catalyst or Concern?

For investors, the proxy battle presents a binary bet. If HG Vora’s nominees win seats, they could force hard choices:
- Asset sales: Monetizing underperforming digital assets could reduce debt and boost FCF.
- Governance overhaul: Aligning executive pay with performance and halting reckless M&A could restore credibility.
- Core focus: Reinvigorating casino operations, which generate stable cash flows, could improve valuation multiples.

Conversely, if PENN retains control, its digital strategy risks further dilution. The company’s track record—repeatedly missing profitability targets—supports HG Vora’s skepticism.

Conclusion: A Contrarian Opportunity in the Making

PENN’s stock trades at a 25% discount to peers on EV/EBITDA, reflecting governance and strategic risks. The proxy battle creates a catalyst to resolve these issues. While the board’s entrenchment tactics (seat reduction, litigation) raise red flags, the inclusion of two HG Vora nominees signals some compromise.

Investors should buy PENN now, targeting a 20–30% upside if the company pivots toward shareholder-friendly actions. Even a partial win—such as halting further losses in digital operations—could stabilize the stock. The risks are asymmetric: PENN’s core assets provide a floor, while governance reforms could unlock a valuation rerating.

The jury is still out, but the pressure from HG Vora is a necessary wake-up call for a company that’s lost its way.

As of May 2025, PENN’s market cap is ~$10B, with 4.8% owned by HG Vora. The June 17 shareholder vote will determine whether this proxy battle becomes a turning point—or a cautionary tale.