Penn Entertainment CEO Jay Snowden may have played quarterback at Harvard University but when goes up against activist investors he’s out of his league. Specifically, the dissident firm of HG Vora laid out a 115-page beatdown, part of its campaign to gain leverage on Penn’s corporate board. It faulted Penn for “poor strategic decisions, failed transactions and poor execution.” Can’t argue with a word of that.
Vora is pursuing a trio of Penn board seats, although only two are now up for grabs after Penn (rather conveniently) declared the third seat to be nonexistent, expediently shrinking the size of its board to eight voters. At the root of Vora’s case is the contention that Penn (i.e., rookie CEO Snowden) made a costly swerve away from lucrative iGaming into the profit-elusive field of online sports betting. Not only that, Penn got into the field 18 months late, after extensive dithering. In an a seemingly insane move to keep up, Penn entered a half-assed purchase of Barstool Sports, which turned out to be more trouble than it was worth. It then doubled down on the Barstool failure by forming ESPN Bet, another struggling venture. Thus, Vora points out, a company worth $2 billion and change has spent $4.2 billion trying to crack the OSB market, without noteworthy success.
Worse still, like too many contemporary execs, Snowden has evidently seen Penn as his own oyster, a company to be plundered in order to enrich himself. Per Vora, “Executive pay has almost doubled since 2021 … despite stagnant revenue and declining profits and market value.” Snowden himself pulls down a kleptocratic $26.5 million a year and has the company jets schlep him about an eyebrow-raising amount. (Penn issued a demurral rather than a denial.) Flight records can be damning things and Vora did some sleuthing in that department: 462 flights in and out of Snowden’s pied-a-terre (Boston) over a five-year period. CFO Felicia Hendrix was also not above some featherbedding it seems. Another Penn-owned jet zipped in and out of Teterboro, New Jersey (Hendrix’s neighborhood) 212 times in the same sampling period. Even for a far-flung company like Penn that’s a preposterous amount of jet-setting.
Unfortunately, Vora stops short of calling for Snowden’s head on a platter, the obvious solution. Instead, the Penn board is urged to “carefully review Mr. Snowden’s track record and performance and consider whether his contract should be renewed.” And Snowden is feeling the heat, having started backing and filling on whether ESPN Bet would last past next year. (It needs to reach 10% of market share, a goal of which it is about 70% short.) Penn will humor Vora to extent of allowing the names of Carlos Ruisanchez and Johnny Hartnett to be place in nomination for board sets. But in a move that smacks of pettiness and jealousy, it cut former Penn CFO William Clifford off at the knees, saying he couldn’t be nominated.
Snowden is right that Vora is “short-sighted” when it prioritizes stock buybacks over any all other curatives. And he’s promised a profitable digital division this year, so he’s placed his own head in the noose. Still, if it weren’t for the reliable performance of Penn’s terrestrial casinos, Snowden probably wouldn’t have a job at this point. Regardless of whether he follows Vora’s suggestions or not, Snowden needs to stick to the ground game and lay off the Hail Mary passes.
Stating the obvious. Well, someone has finally twigged to Bally’s Corp.’s precarious financial situation. The dog that caught the proverbial car (Star Entertainment, in this case), Bally’s may have just enough money—$130 million—to consummate the deal, but not enough to keep Star in the style to which it is accustomed. Grant Samuels & Associates examined Bally’s and recommended the takeover … but not before several red flags were raised. Since the choice is either to go with Bally’s or see Star turn turtle, it’s an unenviable but obvious call.
Yet what happens once Bally’s takes over? As Samuels put it, “The sheer amount of debt it carries raises a question as to whether it has sufficient financial firepower to participate in any significant follow on capital injections if that is required by The Star.” Chairman Soo Kim, the man with eyes bigger than his stomach, has already more than hinted at a new, bare-bones regime at Star’s three Australian casinos, running them as grind joints. It sounds self-defeating to us, but facing reality is not Kim’s strong suit. He issues crazy mandates which his long-suffering executive team is obliged to attempt.
In this case, Star was bleeding cash when Bally’s arrived and the latter must somehow stanch the flow without having deep monetary pockets of its own. As for the aforementioned debt, which dwarfs Bally’s own cash flow, at least the balloon payment ($1.8 billion) doesn’t come due until 2028. Until then, Bally’s has all of $20 million in debt maturities. Ergo, Kim’s desperation strategy of putting his marbles on Chicago and hoping the in-progress megaresort proves to be such a money-spinner that the day of reckoning can be forestalled. Kim has also committed the company to money-gobbling projects in Las Vegas and New York City, with no clear strategy for paying for them. What could go wrong? Plenty.
April was mildly positive for casinos in Detroit. True, Hollywood Greektown was flat at $25 million, but that’s hardly cause for complaint at that property. MotorCity ticked up 1% to $33 million and MGM Grand Detroit rose 2.5% to $51 million. iGaming action shot up 28.5% to $248 million, however, with FanDuel outdueling BetMGM for supremacy, 27% to 26%. DraftKings had a 17% share, Caesars Palace Online managed a respectable 7.5% while Hollywood Casino garnered 2.5%. Sports betting saw a light rise in revenue to $42.5 million, off of $417.5 million in handle (+4.5%). FanDuel again prevailed, with $19 million to DraftKings’ $10.5 million. Others in contention were BetMGM ($6 million), PointsBet ($3 million), ESPN Bet ($2 million) and Caesars Sportsbook ($1 million).
It was a decidedly good April for casinos in Massachusetts, especially Plainridge Park. The slots-only racino jumped 9% to $15 million. Encore Boston Harbor hopped 4% to $63.5 million and even MGM Springfield gained 3.5% to reach $23.5 million. Sports betting tallies favored DraftKings, which soared 57.5% to $38.5 million whilst FanDuel faded 8.5% to $18.5 million. BetMGM ($4 million), Fanatics ($3 million) and ESPN Bet ($2 million) all made it onto the leader board. Caesars Sportsbook and BallyBet did not.