PENN Entertainment’s prolonged battle with activist investor HG Vora has taken another turn after an independent Special Litigation Committee (SLC) concluded the company’s board acted appropriately and “in good faith” during last year’s heated proxy showdown. The committee’s findings, filed in federal court on November 26, detail why it believes PENN’s leadership neither violated fiduciary duties nor mishandled the decision to shrink the size of its board.

The dispute traces back to PENN’s move to reduce its board from nine directors to eight, which effectively prevented HG Vora’s third nominee—former CFO William Clifford—from standing for election at the June 2025 annual meeting. While two of the activist investor’s candidates, Johnny Hartnett and Carlos Ruisanchez, won seats, HG Vora alleged the reduction intentionally limited shareholder choice.

According to the special committee, which consisted of two independent non-director members supported by outside counsel, the board’s actions were justified. Its report states that “the Board acted on an informed basis, in good faith and for the best interests of PENN in the exercise of its business judgment in its decision to reduce the overall size of the Board from nine to eight.” The committee also determined that “it would not be in the best interests of the company to pursue the derivative claims.”

PENN’s committee emphasized that potential regulatory complications played a significant role in the board’s decision-making. As the report, cited by StreetInsider, explained, “A major consideration in the board’s decision was the board’s belief that, under the circumstances, it was necessary to avoid the company’s exposure to potential regulatory risk, which could jeopardise its gaming licenses, its most important assets. At all times, the board acted with the advice of legal and gaming experts.”

Report Criticizes HG Vora’s Regulatory History

A substantial portion of the report focuses on HG Vora’s past regulatory issues, which the committee argues influenced its evaluation. It claimed that “HG Vora had a history of pushing the boundaries of gaming control restraints” and pointed to a breach of institutional waivers in December 2023. The report further noted that the fund had previously paid nearly $1 million to the SEC for failing to meet Schedule 13D reporting deadlines during an unsolicited bid for Ryder System.

The committee also highlighted concerns related to Clifford’s nomination, describing him as tied to “a controversial, unlicensed shareholder determined to influence corporate governance,” and noted that his earlier consideration for a board position had been rejected due to limited experience in interactive gaming and a conservative strategic outlook.

HG Vora forcefully rejected these characterizations. In a letter to PENN, its attorneys argued: “The Draft Report makes clear that the investigation was biased, misconstrues the appropriate legal framework for assessing the board’s decision, provides no factual support for the central premise underlying the SLC’s conclusion, and contains erroneous factual assertions.” HG Vora also objected to having no role in selecting SLC members and criticized the report for not addressing PENN’s broader business underperformance.

A Year-Long Corporate Clash Nears a Critical Juncture

The SLC’s findings arrive after months of escalating conflict. HG Vora launched its proxy campaign early in 2025, contending that PENN’s strategic direction—particularly its costly forays into media and sports betting, including purchasing Barstool Sports and later selling it back for $1—had eroded shareholder value. The tension intensified with the investor’s lawsuit filed on May 7 and its public 116-page critique urging major shifts in company strategy.

Following a federal judge’s decision to deny HG Vora’s request for an expedited trial, the SLC was appointed to independently assess the claims. Its latest report now gives PENN a significant legal advantage. If the court accepts the committee’s conclusions, parts of HG Vora’s derivative claims may be dismissed or significantly narrowed. Still, the investor may challenge the committee’s independence or methodology, potentially extending the dispute.

For now, the SLC’s report marks the most consequential development since the shareholder vote and suggests the proxy fight may be entering its final phases.