PENN Entertainment has been operating in challenging conditions with the sports betting segment continuing to underwhelm and tension from shareholders rising – can the company really turn its performance in a segment that is dominated by a quasi-duopoly between FanDuel and DraftKings, with a third wheel in the face of BetMGM?
PENN Acknowledges Difficulties But Outlines Action Plan
Penn CEO Jay Snowden and Chairman David Handler seem to think as much as they have penned a new letter ahead of the annual meeting due on June 17, which will definitely raise questions about ESPN Bet’s moribund performance of late. In the letter, PENN’s top executives acknowledged the current operative realities.
“That said, our market share and financial performance in sports betting to date has not met our expectations. Our Board and management team are moving swiftly and decisively to recalibrate execution and unlock the full value of this partnership. We have a committed partner and shared desire to compete and build share in a financially responsible way,” the letter explained.
There is some cause for celebration amid the gloom, however, as PENN has made headway, particularly insofar as player acquisition has been concerned, with the company working closely with ESPN to deliver on stronger results, but this is not guaranteed, as the duo also mentioned “optionality” and “control over our future” should, despite its best efforts, the desired results are not achieved.
Shareholders Up in Arms But Won’t Interfere With Company
This is hardly the inspiring pep talk that you would like to hear from the leaders, but it is all PENN is able to deliver at present date. PENN has also faced pressure from activist investors, notably HR Vora who has relented after the company agreed to nominate two board members picked by the investor.
However, ESPN could just as easily walk out of the deal. In August, the two sides will have the right to exit the agreement if they wish to, based on the original contract signed exactly three years ago on the same date.
ESPN Bet is said to hold just 2.8% of the sports betting market share in the United States – a fairly small share given that PENN did not from scratch and the prominence of the ESPN brand in general.