PENN Entertainment Faces Tough Proxy Battle Over Strategy

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00:00Okay, so this is not an argument of dumb,

00:02although I do feel dumb trying to read

00:04and understand this story.

00:05I gotta be honest with you, I've read it several times here

00:07in Legal Sports Report.

00:08It seems to me that there's this battle

00:11over the amount of money that they spent

00:12in terms of advertising with Penn Entertainment

00:14and this whole debacle, how it turned into ESPN bet.

00:17So I'm gonna ask you, Sam, to sort of summarize this

00:20for everyone watching out there,

00:21because I think you're gonna have to read this thing,

00:23no offense, gonna have to read it a couple times

00:25to understand it.

00:27Yeah, shout out to all the other reporters

00:30at Legal Sports Report who do the hard work

00:31of digging through the 10Ks, the other SEC filings

00:35to kind of make sense of what's going on.

00:36And to your point, Craig, even when you do all that,

00:39it can kind of seem pretty complicated what's going on.

00:41At the end of the day, you have Penn Entertainment,

00:43which is a major gambling company,

00:47major company traded on the New York Stock Exchange.

00:50They've been trying to compete in online sports betting

00:52for a while now, and online sports betting

00:56is sort of a sum of a lot of investment upfront,

00:59and hopefully we see the returns later.

01:01Now we're at the point where FanDuel DraftKings,

01:03they're starting to see some of that return on investment.

01:05And then you have the investors at Penn Entertainment,

01:08which had famously bought Barstool Sports

01:11to run Barstool Sportsbook.

01:13That was a disaster.

01:14They sold it back to the founder for $1

01:16after paying billions of dollars for it.

01:19Then they moved over to give ESPN a ton of money as well,

01:22just to use their name.

01:24That so far has not been working out great for the company,

01:27although they say they're improving their metrics.

01:28And there's been a group of investors at Penn

01:31that owns a sizable amount of shares

01:33that has gotten really frustrated with that

01:35and does not like the direction the company is going.

01:38This week, they filed with the SEC in a major move,

01:41nominating three directors to the board,

01:44essentially trying to take over more seats

01:46and control away from the leadership

01:49that runs Penn right now.

01:50So what we're talking about is basically a proxy battle

01:52that Penn has on its hands.

01:55This group, HG Vor, has criticized Penn harshly,

01:58mainly around online betting.

01:59Remember, Penn is a company that owns a ton of casinos,

02:02ton of resorts, other assets across the country.

02:05They've pretty much said,

02:06hey, we've wasted all this money on online gaming,

02:08about $4 billion to be exact,

02:10and we really don't have anything to show for it.

02:12And we're still just kind of being told,

02:14wait for the results, wait for the results.

02:16They call the strategy overpriced, poorly negotiated,

02:19and they've really taken issue

02:20that leadership hasn't really, to this point,

02:23faced any repercussions for kind of their failures.

02:26So what they want is instead to kind of, as I understand it,

02:29sell off the remaining online tech assets that they have,

02:34kind of get out of the game,

02:35and then just really double down

02:36on what has made them a good business in general,

02:38is their casinos.

02:39So this is definitely not the last we'll hear of this story.

02:42It's gonna develop.

02:43But if I'm Penn right now

02:44and I'm struggling to stay alive with online betting,

02:46this is the last thing I want in my hands.

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