The Call for Change: Activist Investor Urges Penn Entertainment to Consider Sale

Key Takeaways

• Activist investor Donerail Group called on Penn Entertainment’s board to sell the casino, online gaming, and racetrack operator.
• Donerail Managing Partner Will Wyatt criticized the board for bad deals and overpaying CEO Jay Snowden, allegedly hurting shareholder value.
• Wyatt suggested that Penn Entertainment could be worth $5.9 billion to $6.9 billion.

Penn Entertainment (PENN) shares experienced a significant surge of over 18% in intraday trading on Friday following a call from an advisory firm and activist investor for the operator of casinos, online gaming, and racetracks to explore a potential sale.

Donerail Group’s Managing Partner Will Wyatt penned a letter to the company’s board of directors, accusing them of being “riverboat gamblers” whose flawed interactive strategy and poor capital allocation decisions have negatively impacted shareholder value.

Penn Criticized for Buying Barstool Sports

Wyatt specifically highlighted a series of unsuccessful online gaming deals, with particular emphasis on the acquisition of Barstool Sports in 2020. The subsequent sale of Barstool Sports back to its founder for just $1 resulted in a nearly $1 billion loss, according to the activist investor.

Furthermore, Wyatt condemned what he deemed as “excessive compensation” for CEO Jay Snowden, despite what he described as “extremely poor performance” by the company.

Wyatt argued that Penn’s stock price currently lags significantly behind the intrinsic value of the company, suggesting that its casino assets alone could be valued at more than double the firm’s current market capitalization. He estimated a potential price range for Penn Entertainment between $5.9 billion and $6.9 billion.

Penn Stock Surges After Activist Letter

Questioning the board’s decision to continue operating as a standalone entity, Wyatt posed the query, “how can the Board continue to argue the benefits of operating as a standalone entity, which has thus far amounted to an overly risky and highly unprofitable gamble, in the face of what would likely be robust strategic appetite that could yield significant upside for investors?”

Representatives from Penn Entertainment did not immediately respond to requests for comment on Friday.

Despite Friday’s surge, shares of Penn Entertainment were still down by approximately one-third of their value in 2024, indicating ongoing challenges for the company.

For more information, you can read the original article on Investopedia.