PENN Entertainment’s shift to online gaming has faced criticism from its investor, HG Vora.
In a letter published by HG Vora and signed by the group’s Founder, Parag Vora, the firm, which owns 4.8% of PENN’s shares, took aim at PENN’s attempt at a digital transformation from a regional casino operator, claiming it has been plagued by “value-destructive deal-making, reckless capital allocation and poor execution”.
HG Vora also refuted claims made by PENN that it has generated an increase in value for shareholders – stressing that PENN’s stock price has declined over the last ten years.
“By nearly all relevant measures, the company is less profitable and less valuable than it was before the company embarked on its digital transformation,” wrote Vora.
“We believe PENN trades at a discount to its intrinsic value because its management team and Board of Directors have lost credibility and investors fear further value-destructive decisions. Surprisingly, it seems that the Board thinks PENN’s performance has been laudable.”
Worst in the industry’s history
The letter name-checked PENN’s President and CEO, Jay Snowden, as well as its Board Chair, David Handler, accusing the pair of overseeing what it believes to be “a string of transactions that stand among the worst in the industry’s history”.
It highlighted PENN’s ESPN Bet venture and the acquisitions of theScore in Canada and Barstool Sports. The latter of which was purchased for $500m before its shares were sold back to Barstool’s Founder, Dave Portnoy, for just $1.
“Despite this prolific spending, we believe that PENN’s online sports betting strategy has failed,” stated Vora. “Nearly two years after Mr. Snowden announced that the Company was targeting double-digit market share and a ‘podium position’, ESPN Bet is the 8th-ranked online sports betting platform in the U.S., with its market share hovering around 2%. Additionally, by nearly all relevant measures, the Company is less profitable and less valuable than it was before the Company embarked on its digital transformation.”
Vora also took issue with Snowden’s compensation, claiming that he has been paid more than $120m since 2021, despite PENN’s market value declining by approximately $11bn during that time period.
Vote for change
HG Vora filed its definitive proxy statement with the Securities Exchange Commission (SEC) alongside the letter in a bid to get PENN shareholders to vote for all three of its board candidates.
Vora urged PENN’s shareholders vote HG Vora’s GOLD proxy card and implored those who have already voted to change their vote using the GOLD proxy card.
This comes after PENN only put forward two of HG Vora’s three proposed board candidates, approving two independent candidates but rejecting former PENN National Gaming Chief Financial Officer, William Clifford.
In response, HG Vora has sued PENN in the Eastern Pennsylvania District Court, claiming PENN is violating the law by removing one of the three elective board seats without notifying shareholders.
Vora called the decision to reduce the number of directors up for election as “perhaps the most brazen act of entrenchment” and “a desperate manoeuvre”.
“Shareholders should not tolerate such a manipulation of the electoral process, nor should they continue to accept PENN’s dismal performance,” finished Vora.
“We believe PENN’s directors do not want Mr. Clifford in the boardroom to scrutinise their dealmaking or question their strategy or leadership — even though that is exactly what is needed.”
SBC Americas reached out to PENN for comment but had not heard back at the time of writing. The company’s annual meeting of shareholders is scheduled for 17 June.
