Pushback as PENN Entertainment Re-Elects Board Members and Approves Pay Packages

While ESPN BET is routinely creeping into the top five sportsbooks when states report monthly legal sports betting financials as the book continues its first year of operation, its operator, PENN Entertainment, has some uneasiness in its ranks. It turns out that shareholders for the company behind one of our best sports betting sites are not super keen on the compensation executives are receiving. 

It's not entirely unusual for shareholders to oppose executive compensation, particularly when dealing with millions of potential voters. But it is notable that the number of those against the pay plan has been growing significantly since last year. 

Here's our ESPN BET promo code for interested bettors.

The numbers

Voter apathy runs deeper than just local and federal politics. Over 21 million shareholders didn't cast a vote one way or another concerning the payment package, and just shy of 330,000 abstained. PENN reported that of those who voted, 58.7% cast a vote supporting the pay package.

If you consider those who didn't outwardly vote against the package as counting in support of it, 48% of total shareholders backed the executive pay plan. Last year, that number was 76.5%, signaling major growing discontentment. 34.3% of eligible shareholders voted against the plan, according to PENN's most recent SEC filing, which grew from just 8.4% a year ago.

What are the issues?

PENN shareholders are increasingly concerned with the company's growth strategies, particularly tied to iGaming and legal sports betting. Donerail Group, which is an asset manager and activist investor, penned a letter to the PENN board of directors that caused a spike in stock price, as there was hope that effort would result in change. 

"The Company eschewed its tried-and-true strategy of expanding its brick-and-mortar casino operations in lieu of a ‘bet the house' focus on constructing an online sports betting business to compete with market leaders DraftKings and FanDuel," Donerail managing partner Will Wyatt wrote. "While we understand that ESPN Bet appears as the company's newest bright and shiny object that may very well have significant value under the right owners, we ask that the Board take a moment to reflect objectively on the past four years of execution, assess the shareholder capital that has been destroyed, and recognize that shareholders may simply be tired of continued gambling on uncertain outcomes."

PENN has devoted nearly $4 billion to the legal sports betting market since 2019. The company lost almost $1 billion in purchasing and selling Barstool Sports. It acquired Canadian sports betting outlet theScore for a whopping $2 billion and now has entered into its business with ESPN BET.

The company's interactive gambling unit posted a fourth-quarter loss of $333.8 million in 2023, and it's been on record stating that it expects the unit to post a similar loss across 2024. 

Investors are getting fed up with ESPN BET's inability to inch closer to the top two, DraftKings and FanDuel. When it launched in November, the company reached a peak market share of 10% of the gross sports betting revenue, which gradually decreased to just 3% in April 2024. 

Despite the stock falling significantly since CEO Jay Snowden took over in 2019, he was compensated just short of $100 million in cash and stock awards between 2020 and 2023. 

Board votes

PENN's board voted unanimously to recommend the executive pay package. But as Earnings+More noted, the Donerail letter may not have come in time to sway anyone's vote. That makes it no less scathing, but perhaps it had less sway on the outcome than originally intended. 

David Handler, PENN Entertainment's chair, received 27% of votes against him in his bid to be re-elected to the board. Vilma Black-Gupta (27%) and Anuj Dhanda (16%) also received considerable pushback. Ultimately, the trio were re-elected, but those numbers are concerning, especially since there were no competing candidates. 

"Concerningly, it appears that the board has an obstinate and heightened level of confidence in the Company’s management team, and it's willing to compensate the company’s chief executive officer exorbitant amounts of money, notwithstanding the continued earnings misses, guidance cuts, and stock price underperformance," Wyatt's letter continued.