Donerail Blasts Penn Entertainment for Underperformance, Proposes Sell-Off


In a pointed critique of Penn Entertainment’s management, investor group Donerail publicly aired their grievances to the casino operator’s board of directors. Donerail, long-time stakeholders in Penn Entertainment, accused the leisure company of underperforming in the online betting arena. The group suggested the company mulls over selling itself so as to boost shareholder value and even went as far as to criticize CEO Jay Snowden for what they perceived as disproportionate remuneration.

These accusations were corroborated by Will Wyatt, Donerail’s Managing Partner. Expressing his dismay over Penn spending an extensive four years and monstrous billions of shareholder capital in a vain attempt to ascend to the echelons of online sports betting, Wyatt added fuel to Donerail’s fire. He lamented the lack of success despite huge financial investments.

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Laying into the company’s governance, Wyatt’s letter pointed at a worrying cycle of repeatedly missing financial estimates. The company’s insatiable desire to continue pouring funds into its juvenile Interactive projects, irrespective of previous disappointing results, only served to tarnish the reputation of the executive team and the board of directors.

Between January 2020 and February 2023, Penn invested a whopping $551 million, in an audacious move to leverage the brand power of Barstool Sports, another player in the online and retail sportsbooks industry. But the ambitious venture didn’t bear the anticipated fruit.

A notable point in the company’s strategy was highlighted last August: Penn sold Barstool back to its founder, David Portnoy, for a nominal fee. As a part of a high-stakes deal, the company teamed up with Walt Disney to use the popular ESPN brand for an ESPN Bet mobile betting app, run by Penn. This agreement came with a staggering cost – not only did Penn commit to paying ESPN $1.5 billion over a decade, but they also granted the network equity warrants worth $500 million.

The potential financial gain from the agreement was overshadowed by Penn’s struggle to gain a significant market share. This, juxtaposed with larger industry competitors DraftKings and FanDuel, was another troubling sign.

Despite these issues, Donerail stirred the stock market with their open letter, causing Penn shares to rally and close 19.62% higher – a marked departure from the norm. However, the woeful performance of Penn shares over the past three years wasn’t overlooked by Wyatt. As he noted in his communication, the stock plummeted 80% – ending the day at a woeful $17.50, a far cry from the record high of $142 in March 2021.

Amidst this downward spiral, Donerail’s stance is firm – they believe Penn should contemplate selling itself. Wyatt suggests that the move could potentially bag them more than twice the current market value of $2.19 billion.

Wyatt’s analytical letter to Penn’s board didn’t mince words when it came to their CEO’s high paycheck. According to the investor, the board approved a total of $99.3 million in monetary remuneration for CEO Jay Snowden spanning 2020-2023 – while the stock significantly depreciated during the same time frame.

Indeed, Wyatt charged, Snowden’s compensation was so generous that Penn got highlighted as a case of misuse of funds in a report by As You Sow, a prominent shareholder advisory group. The sentiment was mirrored by institutional shareholders, according to Wyatt, who named BlackRock, Vanguard, State Street Global Advisors, and CalSTRS as firms who’ve cast their vote against Penn’s executive salary structure. However, Wyatt noted, the corporate pay scale remains largely unchanged, much to the dismay of key stakeholders.