Greenlight Capital Takes Position in Penn Entertainment Amid Market Skepticism
David Einhorn’s Greenlight Capital has taken a “medium-sized” stake in Penn Entertainment, signaling a strategic move despite market reservations about the company’s recent undertakings.
The acquisition, established at an average price of $22.69 per share, seems to be a calculated risk by Greenlight in the face of prevailing market skepticism, particularly surrounding Penn’s valuation and operational direction following the Barstool sportsbook integration.
Valuation Challenges and Market Perception
In a recent letter to investors, disclosed by Seeking Alpha, Einhorn critiqued the market’s current undervaluation of Penn’s ESPN Bet venture.
He pointed out that the market effectively assigns a negative value to this segment. “After the Barstool fiasco, investors have serious doubts about the company’s strategy and management’s competence to execute,” Einhorn commented.
He suggested that even a modest reassessment, crediting PENN with merely 15% of DraftKings’ value, could substantially elevate the perceived worth of ESPN Bet to about $20 per share.
Financial Position and Future Prospects
According to the letter, Penn Entertainment’s current enterprise value stands at approximately $4.3 billion.
Greenlight’s analysis suggests that based on a multiple of 8-12x free cash flow, PENN’s land-based casinos alone should be valued between $4.3 billion and $7 billion.
The involvement of a high-profile investor like Einhorn might influence other investors’ perceptions and confidence in Penn Entertainment’s strategic initiatives, especially in its digital and sports betting ventures.
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