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Steve Friess Questions Jay Snowden's Impact on Penn Entertainment's Progress

Quick Intro

“State of Play,” a column renowned for delving into trending casino and gambling narratives, features the insightful analyses of senior writer Steve Friess. With a rich 25-year career, Friess has contributed to influential publications including Newsweek, Time, and the New York Times.

Several months ago, caught up in a wave of enthusiasm, I ventured an optimistic guess. I set aside my usual wariness and skepticism, swept up by the excitement surrounding the sports and stock market sectors. I had a hunch that ESPN Bet’s launch would be a game-changer for Penn Entertainment, a company that, despite its challenges, should be a major player in the iCasino industry given its extensive reach and long-standing presence in the gambling arena.

Since its debut in mid-November, ESPN Bet has impressively exceeded many expectations. In eight of the fifteen states where it operates and has disclosed data, it swiftly ascended to the top ranks of iGaming apps in both Pennsylvania and Ohio, securing top-three and top-four positions respectively in a mere half-month. This remarkable rise can be attributed, in part, to the substantial welcome promotions rolled out during the app’s launch—a common strategy in the debut of new sportsbook apps, and evidently, a highly effective one in this case.

However, Wall Street’s response remains lukewarm. The stock of Penn National, Penn Entertainment’s parent company, had a muted reaction. Despite the app’s success, the stock, which stood at $24.57 at the time of ESPN Bet’s launch, only marginally increased to $25.38 after seven weeks. Even though it hit a few peaks above $26 and received an upgrade from Bank of America analyst Shaun Kelley, the stock struggled to maintain these gains.

Stock prices, much like sports betting lines, are a barometer I monitor closely. The stock market, in essence, is a regulated form of betting, where the fluctuations mirror public opinion mixed with expert analysis. Yet, there’s an apparent element that seems to restrain Penn Entertainment’s full potential, cryptically reminiscent of ‘Shay Joden.’

Impressive Launch for ESPN Bet in November

The success of ESPN Bet is undeniable. Contrary to some of the skepticism, the app has delivered spectacularly. In the initial month, it managed to triple the betting handle of Barstool, its predecessor, demonstrating a solid start in several states. The statistics are telling:

  • Overall betting handle surged by 178% compared to November 2022, reaching $322.5 million.
  • In Ohio, there was a staggering 257% increase, soaring to $70.8 million.
  • Similarly, in Indiana, the handle escalated by 257% to $27.5 million.
  • Maryland saw a 248% rise, amounting to $33.3 million.
  • The growth in Massachusetts was 181%, reaching $39.1 million.
  • In Michigan, the increase was 143%, totaling $49.9 million.
  • Kansas experienced a 137% jump, with a handle of $21.5 million.
  • Pennsylvania also saw a significant boost of 113%, hitting $65.1 million.

Moreover, the app itself has been well-received. As I noted at its launch, ESPN Bet is not only user-friendly but also includes helpful features like team records and division rankings, setting it apart from other, more complex sportsbooks.

Despite these achievements, the broader outlook for Penn Entertainment remains uncertain. The true impact of ESPN Bet’s success on the company’s overall performance might become clearer with the release of December’s data, marking the app’s first complete operational month. While there has been a recent dip in app downloads, this is expected following the initial launch phase.

Jay Snowden’s Questionable Deal-Making

CEO and President Jay Snowden’s tenure has been marked by some questionable decisions. Notably, Penn relinquished the Barstool brand, which it had acquired for a hefty $550 million, handing it back to its controversial founder, Dave Portnoy, for a mere $1. This move was to facilitate a new venture with ESPN, a decision that seems financially imprudent in retrospect.

On a CNBC appearance on Jim Cramer’s “Mad Money,” following the announcement about ESPN Bet, Snowden described the Barstool transfer as a “win-win-win,” a peculiar characterization of what essentially amounts to a nearly $550 million loss.

Snowden’s role in Penn’s transformation from a regional casino operator to a multi-faceted gaming and entertainment provider is highlighted in his professional bio. He’s credited with shaping the company’s direction post its acquisition of Pinnacle Entertainment in 2018. Yet, it’s debatable whether Penn can be regarded as a leader in any specific sector of the gambling industry.

A Critical Period for Penn, ESPN Bet, and Snowden

The upcoming month is crucial for Penn, particularly for Snowden’s leadership. In November, as ESPN Bet was launched, Snowden attempted to temper expectations for the short term, predicting continuous losses in every quarter of 2024. He suggested that the initial two years post-launch would be challenging before reaching a break-even point or better in the third year.

This forecast might have been a standard expectation for sports betting apps at their inception, but with ESPN Bet’s strong branding and appeal, a quicker turnaround might be anticipated. The synergy between sports betting and ESPN’s broad audience should facilitate a more seamless integration, possibly including live game viewing through the betting app, which is an anticipated next step in the app’s evolution.

The period for nominating Penn board members started recently and will continue until February 7. If HG Vora succeeds in gaining board representation, there’s potential for the company to stabilize and possibly thrive. However, the overall success of ESPN Bet might not be enough if leadership issues persist. The investment community’s patience with Snowden is wearing thin, and without acknowledging the need for support or change, Penn could face more significant challenges.

Final Thoughts

In conclusion, Penn Entertainment’s struggle to realize its full potential in the iGaming and sports betting industry seems to hinge more on leadership challenges than product quality. Despite the initial success of ESPN Bet, skepticism remains among investors, largely due to decisions made under CEO Jay Snowden’s tenure.

Notable missteps, including the costly acquisitions and subsequent divestments of theScore Bet and Barstool, have raised concerns over Penn’s strategic direction and capital management. The coming weeks are critical for Penn, especially with the possibility of board changes driven by major stakeholders like HG Vora Capital Management. The company’s future success hinges not only on the performance of ventures like ESPN Bet but also on effective leadership and strategic decision-making at the top.

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