Activist Investor Urges Penn Entertainment to Consider Sale
Activist investor Donerail Group has called on Penn Entertainment’s board of directors to consider selling the company.
Will Wyatt, Managing Partner at Donerail, criticized the board for making poor business decisions and for overpaying CEO Jay Snowden, actions he claims have negatively impacted shareholder value.
Critique of Business Decisions
Wyatt’s letter to the board highlights several issues, including what he describes as misguided strategies and poor capital allocation.
He pointed specifically to the acquisition of Barstool Sports in 2020, a deal that Penn later reversed by selling Barstool back to its founder for just $1, resulting in a significant financial loss.
Wyatt argued that Penn Entertainment’s stock price does not reflect the company’s intrinsic value. He estimates that Penn’s assets could be worth between $5.9 billion and $6.9 billion, more than its current market capitalization.
According to Wyatt, the board’s strategy of operating as an independent entity has been overly risky and unprofitable.
Executive Compensation Criticism
Wyatt also criticized the compensation of CEO Jay Snowden, describing it as excessive given the company’s poor performance. He believes that more prudent management and strategic decisions could significantly increase shareholder value.
Wyatt’s letter suggests that there would likely be strong strategic interest in acquiring Penn Entertainment, which could provide benefits for investors.
He questions the board’s rationale for maintaining the current standalone operation, given its track record of unprofitable ventures.
Market Reaction
The call for a sale had an immediate impact on Penn Entertainment’s stock price, which surged by over 18% in intraday trading following Wyatt’s letter.
On Friday, shares were trading at $17.36. Despite this surge, the stock has still lost about one-third of its value in 2024.
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