HG Vora, Penn Relationship Soured Over ESPN Bet
The lawsuit filed by HG Vora stems from a broader dispute over the future of ESPN Bet. Penn had operated the sportsbooks for about three years, but still failed to turn a profit. HG Vora blamed leadership for the mismanagement, leading to a battle that spanned almost two years.
Tensions between the two sides exploded earlier this year as the contract to operate the sportsbook was nearing its end. Penn CEO Jay Snowden believed the platform would soon become profitable. That led HG Vora to push for three board nominations during the last meeting, hoping to turn the board against Snowden. Only two nominations were accepted, which HG Vora believed was a deliberate attempt to sabotage their effort.
Proposed Expansion Could Have Threatened Business Interests
The independent review provided clear reasoning for its defense of Penn, leaving little room for challenge.
“The Committee determined that the Board acted in good faith within its business judgment and in furtherance of what it believed was the best interests of PENN in its decision to eliminate the Board seat and reduce the overall size of the Board from nine to eight,” the report read. “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 jeopardize its gaming licenses, its most important assets.
The review found evidence that Penn’s leadership and board consulted with gambling experts before the move, leading to their decision to shrink the board.
HG Vora Created Risk With Regulators
One of the factors discussed in the review was the relationship between HG Vora and sports betting regulators.
Several regulators have had issues with the investor, who has violated gambling regulations. Since HG Vora owned over 5% of the company, regulators required it to obtain a license to influence decisions regarding ESPN Bet. They did not comply with the request, though they moved investments around in an attempt to find a loophole.
The report’s findings on this will likely hurt HG Vora’s influence with Penn, and could help take the pressure off Jay Snowden and the rest of the board.
