Penn shareholders are disappointed with the company’s efforts in the mobile sports betting industry, and one in particular, wealth management firm HG Vora, has filed papers with the SEC to nominate three directors in a proxy battle with the current regime.
Abject Failure
HG Vora is getting serious about changing the direction of Penn Entertainment and has nominated three experienced industry professionals to sit on the company’s board, including former Pinnacle Entertainment CFO Carlos Ruisanchez, former Superbet Group CEO Johnny Hartnett, and former Penn CFO William J. Clifford.
“PENN’s Board has overseen a misguided interactive strategy that has resulted in the reckless spending of nearly $4 billion—greater than the company’s entire market capitalization—on overpriced, poorly negotiated M&A transactions and media partnerships that have resulted in large ongoing operating losses due to an inability to execute,” said Parag Vora, portfolio manager and founder of HG Vora. “The Company’s Interactive strategy has been an abject failure due to a pattern of overpaying, overpromising, and not delivering.”
Penn responded with a formal response, which stated the following:
“The PENN Board and management team are committed to creating long-term value for all shareholders and will continue to take actions to achieve that objective. We regularly solicit feedback and engage with the investment community about our strategy, performance, and business priorities,” the letter said. “The Board’s Nominating and Corporate Governance Committee will carefully review HG Vora’s proposed director nominees, in line with PENN’s normal evaluation procedures, and present its formal recommendation regarding the election of directors in the Company’s proxy materials, which will be filed with the U.S. Securities and Exchange Commission ahead of the 2025 Annual Meeting.”
Digital Pitfalls
On April 15, 2021, Penn Entertainment’s stock hit a high of 142.00, but after paying $650 million for the Barstool Sports media empire, which it used to create Barstool Sportsbook, giving the land-based casino company a digital sports betting presence, things began to tumble.
Less than six months after completing the deal, Penn CEO Jay Snowden pivoted and struck a deal with sports media giant ESPN. Snowden was smitten with the idea of licensing the Worldwide Leader in Sports’ four letters to create ESPN Bet.
However, in order to get the deal done, Penn Entertainment would have to pay ESPN $1.5 billion over 10 years and divest itself of the Barstool Sports brand as a contingency to the agreement. Penn sold Barstool Sports back to its founder, Dave Portnoy, for $1 (that is not a misprint) with the stipulation that the company would receive 50% of the profits should Portnoy eventually sell.
Penn also had to dissolve the Barstool Sportsbook to go full tilt with creating ESPN Bet. However, last football season, ESPN Bet captured approximately just 3% of the market, the lowest of the six books reporting and well below expectations.
Penn Stock is now hovering above $21 per share, and investors are not happy. Should things stay stuck in neutral, the partnership has an opt-out clause in August 2026.
“When we announced our partnership, both sides made it very clear that we expected to compete for a seat at the podium. And we’re not on pace right now to do that,” Penn National CEO Jay Snowden said in an earnings report. “We have tremendous plans in place for 2025 and 2026. But if, for whatever reason, we’re not hitting the levels that we need to, then obviously, as you’re approaching the third anniversary, you have a three-year clause in that contract that both sides will have to do what’s in their best interests. And so, that’s always out there.”
