HG Vora Capital Management, led by former Goldman Sachs banker Parag Vora, (right in photo above), has formally requested the appointment of directors to Penn Entertainment’s board. The fund currently holds an 18.5 percent interest in Penn Entertainment, that include swaps.

Casino industry reshaped by activist hedge funds

HG Vora Capital is the second activist hedge fund within a few weeks to intervene with a leading publicly listed casino operator. Following Corvex’s earlier move with Entain a few weeks ago, HG Vora Capital, established in 2009 by Parag Vora, is the latest entrant in this trend.

This move by HG Vora signals its proactive stance to address concerns over the undervaluation of Penn Entertainment’s stock. Expressing apprehension about Penn Entertainment’s undervaluation, HG Vora is in ongoing discussions with Penn management.

Implications for the casino sector

This move indicates a growing inclination for investors to reshape strategies and tackle challenges faced by major players in the global gaming market.

Penn Entertainment’s stock has experienced a 16 percent decline throughout 2023.

However after HG Vora’s intervention, there was a surge of 4.8 percent surge during early trading following the disclosure from the hedge fund.

The specifics of HG Vora Capital’s intervention and its implications for the targeted casino operator remain a subject of keen observation within the industry.

Known for its experienced portfolio management team and a strategic focus on distressed situations, HG Vora Capital manages around $10 billion in assets for 16 clients, delivering an impressive 14 percent annualized return since its inception.

Challenges for Penn Entertainment

Expressing apprehension about the undervalued stock, HG Vora have been in ongoing discussions with Penn Entertainment’s management.

The stock experienced a 16 percent decline throughout 2023.

However following HG Vora’s request, there was a surge of 4.8 percent surge during early trading following the disclosure from the hedge fund.

Addressing Penn’s undervalued stock

HG Vora Capital, founded in 2009 by Parag Vora, a seasoned investment professional with a background at Silver Point Capital and Goldman Sachs, has an experienced portfolio management team with over 35 years of combined investing expertise. The management team includes Gary Morross, who shares a similar professional background with Vora, having previously worked at Goldman Sachs and Silver Point Capital.

Parag Vora, known for his experience in distressed situations, credit and real estate transactions, complemented by his academic credentials from New York University and the University of Michigan, positions HG Vora Capital as a prominent activist hedge fund. The hedge fund strategically invests in actively traded debt and equity instruments, focusing on sectors like gaming, real estate, travel, leisure, retail, and lodging, meticulously seeking mispriced securities. In Q3 2023, it reported a significant concentration in its top 10 holdings, with its largest position being 2 million shares of SPDR S&P 500 ETF TRUST.

Entry into sports betting

This development comes against the backdrop of Penn Entertainment’s recent collaboration with Quail Hollow Club and the Wells Fargo Championship, marking its entry into the North Carolina online sports betting market through ESPN Bet.

Despite these strategic moves, Penn Entertainment released a Q3 2023 financial report revealing a net loss of $725.1 million compared to previous periods. The net revenue showed a slight decrease of 0.3 percent, amounting to $1.62 billion. While there were improvements in the Northeast and Interactive segments, the South, West, and Midwest segments witnessed declines in various metrics.

CEO’s response

In response to the financial report, Penn Entertainment’s CEO, Jay Snowden, (left in photo above), acknowledged the challenges, stating, “We continued to see relative strength in several locations, including our casinos in Ohio, Kansas, Massachusetts, and Missouri, which highlights the benefits of our geographically diversified portfolio of premier regional gaming assets and the addition of retail sports betting offerings at many of our properties.”

HG Vora’s push for director appointments suggests a desire to influence decision-making at Penn Entertainment, potentially steering the company towards a trajectory that enhances shareholder value and addresses concerns about the stock’s performance. As the dialogue between HG Vora and Penn Entertainment’s management unfolds, stakeholders will be closely watching for potential shifts in the company’s strategic direction and governance.

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