PENN Entertainment has had its struggles recently, which has caused an uproar with some of its top investors. There is now speculation that PENN Entertainment could, and should, sell, at least the online portion of the business amid poor performance.
A notable competitor hired a board member with experience in gambling acquisitions, which has driven this belief.
One disgruntled investor, The Donerail Group, published a letter addressing the concerns and directions of PENN Entertainment. Calling for a sale of the company, the chatter on that specific topic has been louder than ever.
Could PENN Entertainment turmoil result in sale?
PENN has been in the news a lot recently, mostly receiving bad publicity due to failed investments and company dysfunction. Frustration is mounting as more than one-third of investors rejected PENN’s executive compensation plans, involving CEO Jay Snowden and CFO Felicia Hendrix.
The Donerail Group’s letter earlier this month focused on the “exorbitant amounts of money” Snowden gets paid, as well as the potential sale of the business, which would “generate meaningful and certain value creation for equity investors.”
Boyd Gaming has been linked to PENN in a potential acquisition of the company. Whether the sale includes both the retail and online verticals remains unknown. Boyd Gaming operates dozens of properties, including Valley Forge Casino, and owns a 5% stake in FanDuel.
Speculation started to arise when Boyd Gaming added Michael Hartmeier to its board earlier this week. Across 25 years, Hartmeier has completed several financing and advisory assignments for gaming companies, totaling $125 billion.
The acquisition chatter has raised PENN’s stock price 13% through Thursday. However, Earnings+More newsletter sources said on Friday that a potential sale is not imminent, and the Hartmeier hire was a coincidence.
“I think it’s a stretch,” an investment insider told E+M. “He’s clearly an experienced M&A advisor, but I don’t think Boyd is naming board members based on any single potential transaction.”
Since Friday’s open price, with perhaps news circulating that Boyd isn’t interested in PENN right now, the stock has dropped nearly 11%.
While Snowden has appeared “quite dismissive” of The Donerail Group’s concerns, and the reported coincidence of the Hartmeier hire, it doesn’t appear likely PENN sells in the near future.
PENN Entertainment, ESPN BET hope to turn around fortunes during football season
PENN’s half-billion dollar acquisition of Barstool did not work, as it sold the company back to founder Dave Portnoy for $1 last August. Since partnering with ESPN BET, the product has been declining since the November launch. It has steadily lost market share among PA online sportsbooks:
- December: 8.9%
- January: 8.9%
- February: 7.9%
- March: 6.8%
- April: 6.4%
Those results have triggered unrest with many of the top PENN investors. However, PENN has remained unmoved by the performance. JP Morgan told E+M:
“They are saying, ‘just wait until September,’ but they have been saying ‘just wait’ for almost a year now.”
During a Q1 2024 earnings call, Snowden hinted at improvements to ESPN BET which include deep integration with the ESPN app and ESPN fantasy app to convert players. There will also be home screen and navigation enhancements, along with a more competitive parlay and prop markets. On cue, Snowden is waiting until September.
“You will start to see some of this at the start of the NFL season and additional features added throughout the football season and in 2025,” Snowden said last month.
“And, of course, a little further down the road, there are integrations with ESPN’s new direct-to-consumer streaming offering later in 2025. More to come on that as we get closer, but you can start to imagine the possibilities with account linking and deeper integration.”
Will these improvements turn around the frustrations from top investors? Time will tell, but investors are tired of waiting.
