June 3, 2024 3 min read

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PENN Entertainment Shares Soar amid Activist Investor Criticism

Activist investor in the company criticized its interactive strategy and suggested divestment of assets in order to create value for stakeholders

After an activist investor in PENN Entertainment sent a letter to the company’s board of directors, the leading gaming and entertainment operator’s shares marked an uptick. In the letter, a six-page long document, PENN’s shareholder, Donerail Group, encouraged the company to consider divesting assets in order to create value that is certain and meaningful for the investors.

Addressed to PENN’s chairman of the board of directors, David Handler, the recent letter was signed by Will Wyatt, a managing partner for the Donerail Group. In the letter, the activist investor criticized recent decisions taken by PENN in light of its operational strategy.

Given our understanding of the Company’s assets, however, alongside an understanding of the industry participants’ current strategic appetite to grow inorganically, we do believe that a sale of the Company’s assets, if undertaken, could generate meaningful and certain value creation for equity investors,

wrote Will Wyatt, managing partner for the Donerail Group

Wyatt was critical of the company’s focus on the online betting vertical. He said that instead of continuing its investment in the land-based sector, the company decided to compete with leading online betting operators such as FanDuel and DraftKings.

Moreover, Wyatt said that although a year has passed since PENN’s focus on ESPN Bet, no improvement was seen. “The Company’s inability on each Interactive initiative has resulted in a loss of market confidence and the stock being dragged down with it,” explained the activist investor.

Company Stock Marks Uptick Following Activist Investor Letter

Donerail Group’s managing partner also spoke about the negative impact for stakeholders, criticizing the management. Wyatt explained: “To shareholder detriment, PENN has not been able to demonstrate the management expertise necessary to build a business that could become a formidable competitor in the online sports betting oligopoly.”

Analyzing PENN’s stock market performance, the newly sent letter outlined that the company’s stock lost 82.2% of its value over the last three years. In the last year alone, the stock value dipped by 41.3%, according to data cited by Donerail Group.

On the bright side, since the letter was sent, PENN’s stock jumped by nearly 20%. Before the release of the letter, the company’s stock traded at $14.65 per share. After the release, the stock price jumped by 19.65% to $17.50 per share.

Despite the criticism, it remains to be seen whether or not PENN would consider the advice of the activist investor. The move doesn’t come as a surprise as activist investors seek to bolster the return for stakeholders in publicly traded companies and often suggest restructuring, divestment of assets or changes in management as methods to achieve growth.

Journalist

Jerome is a welcome new addition to the Gambling News team, bringing years of journalistic experience within the iGaming sector. His interest in the industry begun after he graduated from college where he played in regular local poker tournaments which eventually lead to exposure towards the growing popularity of online poker and casino rooms. Jerome now puts all the knowledge he's accrued to fuel his passion for journalism, providing our team with the latest scoops online.

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