Penn Entertainment’s third-largest shareholder unleashed a scathing attack on the ESPN Bet operator’s management, alleging that the CEO and another top executive have used company planes as a “personal Uber service.”
In a 115-slide presentation, activist investor HG Vora laid out what it saw as “poor strategic decisions, failed transactions and poor execution,” and made the case for shareholders to vote for its nominees to Penn’s board.
HG Vora is seeking to get three new directors elected to the board, though Penn has only put two up for nomination and says the third seat “does not exist” after it shrunk the size of its board from nine members to eight. HG Vora argues this move violated “core shareholder rights” and is suing to have votes for all three counted.
Penn sports betting struggles
HG Vora’s presentation focused on Penn’s struggles with online sports betting and its decision to spend so much on attempting to compete in the vertical in the first place.
It says that giving attention to sports betting, rather than online casino, was “the wrong strategy” as online casino could be larger, more profitable and in a less concentrated market.
When it did decide to focus on sports betting, HG Vora said Penn erred further in attempting to build the business through mergers and acquisitions, instead of organically.
It notes that Penn has spent $4.2 billion, almost double the value of the entire company, on acquisitions and marketing partnerships for its sports betting arm. Despite this, the division is still loss-making and holds a market share of only a little over 3%. HG Vora says Penn’s three main deals in the space – buying theScore and Barstool Sports and teaming up with ESPN – were all flawed.
The hedge fund adds that Penn entered the world of sports betting “too late,” waiting 18 months after the repeal of PASPA before launching Barstool Sportsbook.
Snowden gets the blame
HG Vora puts any failures of Penn’s sports betting ventures at the feet of its senior management team — particularly CEO Jay Snowden, who it noted led the strategy to focus on online sports betting despite having no experience in the field.
It says Snowden’s target compensation of $25 million is too high, particularly when shareholder returns have been negative. Executive pay has almost doubled since 2021, it noted, despite stagnant revenue and declining profits and market value.
HG Vora’s criticisms went beyond financial compensation. It accused management of “excessive and unnecessary” usage of the company’s two private jets.
“Based on publicly available flight data, some of the most common points of origin and destinations for these flights appear to be airports near the homes of Penn executives,” the presentation said.
Penn’s jets made 462 flights to or from Boston, where Snowden lives, over the past five years. It made another 212 to or from New Jersey’s Teterboro Airport, close to the New York home of chief financial officer Felicia Hendrix.
This is far from the first instance of controversy over a leading gaming executive’s private jet usage. DraftKings’ Jason Robins gained attention as the business spent more than $1 million on costs associated with his private plane in 2023, while frequent company plane usage was reportedly one factor behind Entain shareholders turning against Jette Nygaard-Andersen before her 2023 departure.
HG Vora Demands
HG Vora calls for a number of initiatives – besides the boardroom change – to “enhance Penn’s performance.”
It wants to see the operator “right-size” its executive pay by benchmarking it against peers.
HG Vora stopped short of stating outright that Snowden should be removed from his post as CEO but, with his contract set to expire in 2025, the fund said Penn should “carefully review Mr. Snowden’s track record and performance and consider whether his contract should be renewed.”
HG Vora added that Penn should review its strategy, including a “careful” examination of every aspect of its digital business.
It ended the presentation by urging shareholders to vote for all three of its candidates at Penn’s annual general meeting on June 17.
