PENN Entertainment remains under fire from disgruntled investors following a series of votes that revealed waning faith in the company’s leadership group.
The latest report from Earnings+More showed cohesion amongst shareholders, but not in PENN’s favor. This time around, investors took aim at more than just CEO Jay Snowden, who’s absorbed the brunt of their frustrations to date.
According to the E+M newsletter, over one-third of investors rejected PENN’s executive compensation plans. In particular, 34% of eligible shareholders voted against the compensation plans for Snowden and Chief Financial Officer Felicia Hendrix.
The result, which PENN announced Friday in an SEC filing, came after The Donerail Group released its own letter on June 3. In it, the dissident investor called out Snowden’s “exorbitant” pay package of over $6.1 million in 2023.
PlayPennsylvania previously reached out to PENN Entertainment but the Wyomissing, PA-based company declined to comment.
Investors also lacking faith in PENN’s board of directors
PENN recently held its annual general meeting. During the assembly was a vote on the re-election status of several members of the company’s board of directors.
As expected, it revealed shareholder dissatisfaction with PENN’s current organizational direction.
Over one-quarter of investors (27%) voted against the re-election of Board chair David Handler and the reappointment of Vimla Black-Gupta. The latter is a member of the Compensation and Nominating and Corporate Governance committees.
A third board member, Anuj Dhanda received a 16% no vote.
While the percentages may not jump off the screen, an unnamed investment insider told E+M that the votes were “pretty dismal results” for PENN “particularly as no one has put forward a dissident slate of directors.”
The anonymous source also clarified what the results look like when the 17% broker non-votes are factored in. Among those who actively voted, only 42% approved the pay package and 49% voted in favor of Handler.
Insider believes shareholders “persuaded” to side with dissident investors
Alongside Donerail, the list of known rebellious investors also includes HG Vora, which controls 9% of shares, and Greenlight Capital. All three members of the “activist investor campaign” have publicly voiced their displeasure with the current state of affairs at PENN.
As such, the unnamed investment insider believes other shareholders “have been persuaded” to vote with the big three. Notably, this development would have preceded the release of the Donerail letter.
“The Donerail letter actually came a bit late in the process to have influenced many because a huge number of shareholders will have already cast their votes by the time that was published,” the source told Earnings+More.
“But still, their objections as laid out will have influenced some and definitely have an impact on the debate.
JP Morgan chimes in, says PENN locked in on ESPN BET
JP Morgan, the latest actor to receive a speaking role in the PENN-investor saga, said the company’s leadership group remains keyed in on ESPN BET.
And more specifically, the platform’s top-of-funnel efforts and product improvements and integrations with the wider ESPN ecosystem.
The JPM team also noted that PENN did not comment on the recent investor uprising. It did mention, however, that sources have suggested that Snowden was “quite dismissive” of Donerail.
What “quite dismissive” might entail remains vague. That said, the anonymous insider told M+E “that the management team are unrepentant,” while simultaneously reiterating patience.
“They are saying, ‘just wait until September,’ but they have been saying ‘just wait’ for almost a year now.”
In this case, September refers to the beginning of the 2024 NFL season, which PENN views as a potential turning point for ESPN BET.
The app launched in 17 states, including Pennsylvania, on Nov. 14, 2023. By that time, the 2023 NFL season was already onto Week 11.
Possible sale looms as ESPN BET losing market share in PA since launch
While Earnings+More suggested it’s possible PENN take a ‘wait and see approach’ heading into ESPN BET’s first full NFL season, continued heat from investors may force the company’s hand.
For the record, PENN itself hasn’t shared any interest in selling its assets. But if The Donerail Group had its way, that’s exactly what it’s motioning towards.
Using Pennsylvania, one of North America’s leading online gambling markets as an example, ESPN BET has fallen well short of the lofty goals set during PENN’s investor presentation last August.
Then, investors predicted that ESPN BET could generate up to 20% market share by 2027. The reality, however, is that ESPN BET is trending in the wrong direction, especially among PA online sportsbooks.
Since launching in the state five months ago, the online operator has lost market share more often than not:
- December: 8.9%
- January: 8.9%
- February: 7.9%
- March: 6.8%
- April: 6.4%
With no defined direction, PENN’s upcoming October investor day will be crucial in determining the company’s next steps.
