Penn Entertainment Rejects Shareholder’s Call to Sell Company

Casino giant Penn Entertainment has dug in its heels against a recent push by activist investor Donerail Group. A sale of the company is not an option.

Penn Entertainment's Hollywood Casino in Pennsylvania at night. (Source: Penn Entertainment)

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Donerail fired a shot across the bow, urging Penn to sell itself off entirely in order to recoup what it views as significant shareholder losses incurred while the company pursued online sports betting. Donerail's argument hinges on the belief that Penn's purchase of Barstool Sportsbook was a costly misstep. It argued a full acquisition by another company would be the quickest and most effective way to restore shareholder value.

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Donerail specifically pointed to the hefty investments made in launching Barstool Sportsbook, which never panned out. Penn bought Barstool last year for around $550 million before selling it back to its founder, Dave Portnoy, for $1 less than six months later.

The investor group also contended that Penn's investments in the iGaming arena had not yielded the expected returns, leading to a devaluation of the company's stock. Donerail believes that the company's assets, particularly its regional casino portfolio, were undervalued and that a sale could potentially double the current trading price of the company's shares.

Donerail argued that these investments have come at the expense of Penn's core casino business, highlighting a decline in Penn's stock price as evidence. Donerail isn't wrong; Penn's stock has indeed fallen from a high of over $130 per share in early 2021 to around $40 per share currently.

However, Penn remains firmly committed to its current path. The company has essentially ignored Donerail's letter, a sign that it doesn't give it much weight as it continues to focus on its growth strategy.

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ESPN Bet Has a Bright Future

A key pillar of Penn's strategy appears to be the recent success of ESPN Bet, a joint venture with the sports media giant. According to Penn, the ESPN Bet platform has exceeded launch expectations and quickly gained traction in the highly competitive online sports betting market.

Penn's confidence is underpinned by its recent financial reports, which have highlighted the company's robust property-level performance and customer demand. The Interactive segment, which includes ESPN Bet, has seen substantial expansion and has been instrumental in driving the company's digital strategy forward.

Penn CEO Jay Snowden has expressed optimism about the future, noting that the company's strategic alliance with ESPN is expected to create exceptional value and lead to efficient customer acquisition and marketing efficiencies. The company has reported that ESPN Bet has attracted a significant number of first-time depositors and has shown promising key performance indicators, such as monthly active users and handle.

Looking beyond ESPN Bet, Penn also highlighted its faith in the continued growth potential of its brick-and-mortar casinos. The company recently announced a significant investment – a $400 million expansion of its Hollywood Casino York property in Pennsylvania. This expansion underscores Penn's confidence in the enduring appeal of its physical casinos, even as the online market continues to expand.


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