Last updated: January 25, 2024
HG Vora, a casino-focused hedge fund, reveals an 18.5% stake in Penn Entertainment and seeks board seats, expressing concern over the company’s stock performance. The fund, known for successful gaming investments, may resort to activist actions if not granted the influence to nominate directors, potentially shaping the future trajectory of Penn Entertainment.
A hedge fund called HG Vora has a history of investing in casino stocks. It now has an 18.5% stake in Penn Entertainment (NASDAQ: PENN) and wants the gaming company to give it board seats.
The money manager told the Securities and Exchange Commission (SEC) about his or her new 13D filing, which shows the position in the regional casino operator. This includes common stock and derivatives. HG Vora poked fun at Penn for its falling stock price, but it didn’t say how many director slots it wants. The hedge fund had Penn shares in 2018 before.
Due to ongoing underperformance in common stock and concerns about the issuer’s track record of allocating capital, HG Vora, a well-known hedge fund that specializes in casino stocks, has officially asked for the right to name highly qualified directors. The company, which is called the Reporting Persons, wants to work with the Issuer’s management and other board members to help the company reach its full potential. A recent 13D filing with the Securities and Exchange Commission (SEC) talks about this plan.
Penn stock went up 7.48% in early trading after the news. This added to the company’s gain of nearly 16% over the last 90 days, which was mostly due to the successful launch of the ESPN Bet mobile app for betting on sports. Still, the stock is down 10% so far this year, while competitors like Caesars Entertainment (NASDAQ: CZR) and DraftKings (NASDAQ: DKNG) have seen huge gains.
Penn’s HG Vora looks like an activist investor. For the operator to choose directors for 2024, the window opens on January 8 and runs through February 7. That’s when the hedge fund revealed its stake in the gaming company.
In many ways, activist investors try to make things better. A proxy battle could be started by HG Vora if Penn doesn’t give it board seats.
With the news that it owns a stake in Penn Entertainment, HG Vora could have a big impact, showing signs of being an activist investor. As the hedge fund looks at different options, it may suggest changes to the way the business is run, the board of directors and management, the charter and bylaws, the governance structure, capitalization, and dividend policies. It may even push for big business deals or the sale of assets. It’s possible to ask other stockholders for proxies, which would mark the start of a transformative time for Penn Entertainment.
Based on the gaming company’s list of outstanding shares as of Oct. 26, the hedge fund directly owns 14.5 million Penn equity shares, which is 9.6% of all the shares that are out there. The last piece of the puzzle is made up of “a cash-settled swap agreement representing economic exposure to an additional 13,500,000 shares of the Issuer’s Common Stock” and other options that can be settled in cash.
As 2023 comes to a close, activist investors are putting more money into gaming stocks. Before HG Vora said it was interested in Penn, a lot of hedge funds rushed into Entain (OTC: GMVHF). This could have caused former CEO Jette Nygaard-Andersen to leave and helped Ricky Sandler, founder of Eminence Capital, get a seat on the board of the Coral owner.
As for HG Vora, it has a long and mostly successful history of investing in games, which was emphasized in a regulatory filing.
The money manager has worked for Boyd Gaming (NYSE: BYD), Caesars, Gamesys, and the company that came before Bally’s (NYSE: BALY).
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