Penn shares rebound slightly after falling more than 20% on Thursday

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Shares of Penn National Gaming Inc. on Friday regained about a third of the value lost Thursday when shares plunged nearly 21% on the day of the company’s third-quarter earnings call.

Penn closed Friday up $ 4.36, 7.6 percent, to $ 61.78 per share on more than three times the daily average volume.

Gaming industry analysts had speculated on Thursday that the drop in stock prices was the result of a negative article about the founder of Penn partner Barstool Sports.

“We believe the 20% drop in Penn stocks today is more due to investor reaction to a negative article about visible Barstool Sports founder Dave Portnoy than investor reaction to third-quarter margin deleveraging. quarter or October, ”Joe Greff, Analyst. with New York-based JP Morgan said in a note to investors. “We can think of scenarios in which this article causes legitimate fallout regarding the effectiveness of the Barstool Sports brand, its use by Portnoy and Penn in the United States”

Alleged sexual improprieties

The Business Insider article accused Portnoy of sexual irregularities with female guests. Portnoy made a 10-minute video online denying all accusations.

“Sir. Portnoy has weathered similar storms in the past and we are not aware of any criminal investigations; but we also believe that several constituents may need clarity on the situation before we can fully understand the long-term ramifications for Barstool and Penn, ”said Barry Jonas of Atlanta-based Truist Securities in a note to investors.

Deutsche Bank gaming analyst Carlo Santarelli said: “Our estimates are broadly unchanged as we model a significant deceleration in activity for 2022 and 2023, although this appears to be happening sooner than expected.”

Penn on Thursday reported net income of $ 86.1 million, 52 cents per share, on revenue of $ 1.512 billion for the quarter ended Sept. 30. In the same quarter a year earlier, the company reported net income of $ 141.2 million, 93 cents per share. , on a turnover of 1.13 billion dollars.

Penn President, CEO and Managing Director Jay Snowden made other headlines during the company’s Thursday morning conference call with investors, saying he didn’t think having a property on the Strip was imperative for Penn’s success.

“Generally speaking, I don’t think it’s imperative that we have an asset on the Las Vegas Strip given the approach we have (developing an omnichannel operation),” Snowden said during the call. “I think having representation in all states of the United States is absolutely a strategic imperative for us and we have largely achieved that goal.”

“If we had to find the right asset in the right place at the right price, of course we would be interested. “

Penn was not selected to acquire The Cosmopolitan of Las Vegas when MGM Resorts International took over the resort in late September for $ 5.65 billion.

Snowden was responding to an analyst’s question about the surprise announcement made by MGM in its earnings call on Wednesday that it intended to sell The Mirage. No price tag or potential buyer has been named.

Disciplined approach

He said Penn investors shouldn’t expect the company to pay too much for a Strip property.

“It would be great to have an asset that we could create some retention value for when (the clients are) in Vegas,” Snowden said. “But we don’t think it’s such a strategic imperative that we would pursue an asset or overpay. This is how I feel right now. We’re going to kick the tires if there’s something there, we’re going to be disciplined in our approach and you know, yeah, you’re going to have to pay a higher multiple for a Strip operating company of Las Vegas than you would in most or all of the regional markets.

Penn already operates a Strip property, the Tropicana, which is owned by its real estate investment trust partner, Gaming & Leisure Properties. In April, Bally’s Corp., based in Providence, Rhode Island, agreed to buy the Tropicana from Gaming & Leisure Properties for $ 308 million.

Penn also operates the M Resort in Henderson.

While Snowden said Penn had hoped to buy The Cosmopolitan, which he described as “a once in a lifetime opportunity for top-in-class assets,” the company won’t be spending too much.

“There are a lot of variables that you need to look at asset by asset as they become available – if they do become available,” Snowden said. “But you have to assume we’re not going to chase anything that we don’t think we can get good feedback on.”

Sports betting initiative

During the call, Snowden also commented on funding lobbying efforts to support a sports betting initiative in California. Penn, he said, is one of seven companies backing the initiative with $ 12.5 million.

“I think (the initiative) was built in a way that is good for the state and for those who operate casinos in the state today,” Snowden said. “We’re going to be pretty advanced in collecting signatures in the coming weeks and months and there has been a bit of opposition, so we’re trying to figure that out. We actually want to do this in a way that is completely complementary to the ballot initiative that the tribes already had before we announced the ballot initiative and the language of the ballot initiative. “

In addition to the lobbying effort in California, Penn had additional expenses resulting from Hurricane Ida and regional outbreaks of the delta variant of the coronavirus. The company also reported start-up costs of $ 7.5 million in regional markets for Barstool Sports.

Contact Richard N. Velotta at [email protected] or 702-477-3893. To follow @RickVelotta on Twitter.



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