By Svea Herbst-Bayliss

NEW YORK, April 28 (Reuters) - Hedge fund HG Vora said on Monday it plans to push ahead with a proxy fight at Penn Entertainment PENN.O to try and elect all three of its director candidates, after the casino operator said it would appoint only two of them to its board.

"HG Vora will nominate its three candidates and solicit votes on their behalf," the hedge fund said in a statement.

On Friday, Penn Entertainment said it intended to appoint two of HG Vora's three proposed nominees and was shrinking the board by one to eight directors, leaving only two seats available to be voted on at the meeting in June.

The hedge fund called the casino operator's move a "self-serving action" and suggested it was taken because the company feared "losing three Board seats."

The step has "no legitimate corporate purpose and deprives shareholders of their fundamental right to elect directors of their choosing," the hedge fund said in a statement.

It also questioned whether the company will follow through and name HG Vora candidates Johnny Hartnett and Carlos Ruisanchez, executives with gaming industry experience, as incoming directors. Just 10 days ago the company said it intended to nominate "three different candidates," the hedge fund said in its statement.

Penn did not immediately respond to a request for comment.

Penn's stock price has tumbled 87% from its high in 2021 and HG Vora has criticized management for how it allocates capital and what it has called poor acquisitions.

Originally three directors were planning to stand for re-election but one of those will now retire from the board immediately and the other two decided not to seek re-election, the company said.

Penn operates 43 properties in 20 states, under brands including Hollywood Casino, Ameristar, and Boomtown, according to its website.

(Reporting by Svea Herbst-Bayliss; Editing by Sonali Paul)

((svea.herbst@thomsonreuters.com; +617 233 2138; Reuters Messaging: svea.herbst.thomsonreuters.com@reuters.net))