Investor Criticizes Penn Entertainment's Acquisition of theScore
A significant investor has raised concerns about Penn Entertainment's strategic decisions, specifically targeting the acquisition of Canadian sports media and betting brand Score Media and Gaming.
In the latter half of 2021, Penn acquired Toronto-based theScore for approximately $2.1 billion USD (around $2.5 billion CAD at the time). The acquisition was touted as a move to enhance Penn's digital media and gaming strategy, aiming to create "a complete one-stop entertainment destination." Penn highlighted theScore's pool of Canadian engineering and technology talent as a key attraction.
However, in an open letter to Penn Chairman David Handler, the Donerail Group, a major investor in Penn, expressed doubts about the benefits of this acquisition. Donerail's managing partner, Will Wyatt, argued that theScore's integration has not delivered the expected returns and questioned the rationale behind the purchase. Wyatt pointed out that theScore, a relatively small company with less than $25 million USD in annual revenue, did not significantly boost Penn's revenue or size. Instead, the acquisition was primarily intended to advance Penn’s technological capabilities. Wyatt suggested that a more digitally experienced leadership might have achieved this goal more cost-effectively.
Furthermore, Wyatt noted that the promised "incremental $200 million+ medium-term adjusted EBITDA" from the acquisition has not materialized, and the leadership team from theScore has since left Penn.
Despite poor Q1 2024 results, including an 11.1% revenue drop in the Interactive division (which includes theScore Bet and ESPN Bet), Penn's CEO Jay Snowden defended the acquisition during a May 2 earnings call. He stated that theScore Bet is performing well in Ontario, holding a low double-digit market share in both online sports betting and online casino sectors. Snowden also announced plans to integrate theScore Bet's wagering functionalities into theScore’s sports media app, potentially extending this integration to ESPN Bet in the U.S.
However, amid broader disappointing results, the acquisition is under increased scrutiny.
Donerail Calls for Penn to Consider Selling
Wyatt criticized Penn’s performance in the online sports betting sector and suggested that the company consider a sale, arguing that its leadership has lost credibility. Over the past three years, Penn's shares have fallen by over 80%.
"After four years of effort, attention, and billions of dollars of shareholder capital invested, the company has been unable to disrupt the online sports betting landscape as forecasted," Wyatt stated.
Wyatt also questioned Penn’s $2.7 million CAD ESPN Bet venture, which posted an adjusted EBITDA loss of $196 million USD ($268 million CAD) in Q1 2024. Penn projects a $500 million USD ($682 million CAD) loss for its Interactive segment, which includes iGaming, in 2024.
"The pattern of missed guidance, coupled with continued investment in fledgling Interactive projects without a clear return framework, has significantly damaged the credibility of Penn's management team and Board of Directors," Wyatt added.
Wyatt urged the Board to objectively assess the past four years, consider the shareholder capital lost, and recognize that shareholders might be weary of ongoing investments in uncertain outcomes.
Following Wyatt’s letter, Penn’s shares rose by more than 15% on Friday, May 31. Wyatt claimed that a potential sale of Penn could be worth up to $6.9 billion USD ($9.4 billion CAD), compared to Penn’s current enterprise value of roughly $4.1 billion USD ($5.6 billion CAD).


thefakekush Vavada taking months to pay casino players and now launching a sportsbook? Yeah, no thanks. Imagine hitting a big bet and waiting half a year to get paid. Hard pass.


MrMinerson Finally, someone saying it like it is! Just because one person got lucky doesn’t mean the rest of us should throw money at this slot hoping for the same result.


mooniverse Another state gets flooded with Play’n GO slots. Too bad the RTP is hardly ever player-friendly, with some games barely hitting 80%. Hope they reconsider giving players more control over it.


TheHoodWhisperer It's alarming to see how many young people are getting exposed to gambling through streamers. With the rise of this influence, we need more stringent regulations to protect underage viewers and ensure they aren't encouraged to gamble.


TheHunther This is such a sad story. Gambling can start as a harmless pastime but can quickly turn into an addiction that destroys lives. We need better education and support to help those struggling with it.


YellowToad This is a great step forward! Young people shouldn’t have a criminal record for a mistake, but they should still face consequences. A fine system makes much more sense.


YELLOWWOOD This is amazing news! The NFL coming to Australia is a huge win for sports fans. The MCG will be a fantastic venue—can't wait to see which team the Rams will face!
Wyatt's letter brings up some critical points about Penn's recent strategic decisions. The significant drop in share value over the past three years is alarming and suggests deeper issues within the company's management and investment choices. Penn needs to reassess its approach to the online sports betting market and consider whether continuing down this path is in the best interest of its shareholders. The suggestion to sell could be the wake-up call the company needs to realign its strategy and restore investor confidence.
I've been a fan of theScore for years and was initially excited about Penn's acquisition. However, it's clear now that the integration hasn't gone as planned. While the app is great and has a solid user base in Ontario, it's troubling to hear about the financial losses and leadership issues. Hopefully, Penn can turn things around and leverage theScore's potential more effectively, but Wyatt’s points certainly highlight some serious strategic missteps.
As someone who follows Penn Entertainment closely, Wyatt's concerns are very valid. The acquisition of theScore seemed promising at first, but the lack of tangible returns is disappointing. Penn's focus should perhaps shift towards stabilizing and optimizing their existing assets rather than continuing to invest heavily in uncertain ventures. It will be interesting to see how the company responds to this criticism and if they consider Wyatt's suggestion of a potential sale.