Case for the defense
Penn breaks its silence on activist investor campaign
Under pressure Penn Entertainment slams HG Vora.
In +More: Flutter completes NSX deal.
Earnings: Gambling.com, Gentoo Media, High Roller.
DraftKings’ Robins says prediction markets could be a legislative spur.
Hard Rock Bet is growing – we know you know! And we want to bring in some more maestros to make beautiful music in our Sportsbook. You need to be among the very best in the industry to be considered for these roles. Are you up to it?
Poisonous Penn
Myopic: Penn Entertainment’s board has used its own shareholder letter to launch an attack on HG Vora, claiming the activist investor’s demands are “value-destructive… short-sighted, short-term and self-serving.”
The company went on to claim HG Vora had “demonstrated flagrant disregard” for state gaming regulators.
Moreover, it had “rejected each of our reasonable offers to reach a mutually agreeable resolution.”
No, you’re value destructive: The letter comes in response to HG Vora’s own letter to shareholders earlier this week that claimed Penn’s incumbent board and management had overseen “value-destructive deal-making, reckless capital allocation and poor execution.”
The tit for tat comes ahead of a vote in June at the Penn AGM.
Shareholders will vote on HG Vora’s three nominations for the board vs. Penn’s adoption of two and rejection of the third.
Doth protest: Penn restated its business case, in particular its interactive arm, which it insists has “strong momentum” and “immense opportunity for value upside.” It said sports betting was the”primary driver” for the entire Penn business.
Don’t pull that lever: In making its defense, Penn dismissed HG Vora’s professed knowledge of the sector and of making demands that were against the company’s best interests. These include the claim that HG Vora “strongly” advocated a 50% leveraged buyback, which would have increased Penn’s leverage levels to “unstable levels.”
It added that a “key assumption” of this “ill-advised proposal” was that Penn should not consider rent as debt and should “ignore lease-adjusted leverage metrics.”
In addition, it claimed HG Vora advised against pursuing retail growth projects at Aurora and Joliet, Illinois, Columbus, Ohio and Henderson, Nevada.
I’m telling the teacher: The letter also suggested HG Vora’s public call for a strategic review of the whole business, and the interactive arm in particular, went against “explicit direction from state gaming authorities that HG Vora was not permitted to seek provisions of this nature.”
It added that HG Vora’s “brand of reckless disregard for regulators and applicable law puts Penn and all of its shareholders at risk.”
It accused the activist of violating its institutional investor waiver, which caused regulators to say its actions were “improper and impermissible.”
Clifford edge: The activist’s campaign has now devolved into a fight over the number of board placements up for grabs. In accepting two of HG Vora’s names – Johnny Hartnett and Carlos Ruisanchez – it rejected former Penn CFO William Clifford and effectively retired one board seat.
Penn suggested Clifford had previously "volunteered" for a board seat in 2020 and had been rejected.
Ad hominem: The letter went on to rubbish the idea that Clifford was a suitable choice. It said that, after once again interviewing him, the board determined he “failed to demonstrate the base level of open-mindedness” needed for the role.
It added that in his time at Penn National Gaming, as was, Clifford “advocated against key initiatives,” such as upgrading the IT systems, building a customer database and a loyalty program.
Really, you don’t have to thank me: It said that following Clifford’s departure these efforts were eventually “spearheaded” by then COO, now CEO, Jay Snowden.
Geez, let me down gently: The letter added that Clifford’s online knowledge was lacking and that his “general experience is redundant.”
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+More
Flutter Entertainment has completed the acquisition of an initial 56% stake in Brazil-facing NSX, which operates the Betnacional brand among others, for ~$350m in cash. It said it expects the business to contribute $220m of additional revenue in 2025 and an adj. EBITDA loss of ~$70m. This will augment Flutter’s existing Brazilian business, which generated a mere $9m of revenue in Q1 after encountering what CFO Rob Coldrake described in the earnings call as “a few challenges.”
Bally’s has been granted permission by the Illinois Gaming Board to resume construction on its permanent $1.7bn Chicago casino, after a temporary pause caused by an unauthorized construction partner scare, according to local media.
Read across
Sneaky: UK proposals to consolidate remote gambling taxes under a single remote betting and gaming duty (RBGD) risks becoming the “worst kind of stealth tax,” legal experts have warned. In Compliance+More.
+More careers
The big move: The Unit has appointed Srdan Srepfler as VP for engineering. Srepfler was previously on the backend team at William Hill, as well as having engineering roles at the now defunct MoPlay and Dafabet. Last month, The Unit appointed Andy Clerkson, former founder at Grand Parade, as chair.
MGM Resorts has appointed Ryan Abboushi as president of entertainment. Abboushi previously spent 16 years at famed talent agency CAA. Full House Resorts has a new CMO in Joshua Le Duff. Former Better Collective North America COO Scott Miller is joining Betting Hero. Former Flutter marketing exec Andrew Mook will be joining Midnite as head of brand marketing.
Head of Content – Remote
Commercial Manager – Manila
Country Manager (Dutch language) – Malta
The earnings edit
Gambling.com
Bucking the trend: Gambling.com attempted to dispel the gloom hanging over the listed affiliate space this week, with an earnings statement that CEO Charles Gillespie said reflected the fact the company was in its “strongest competitive position ever.”
See yesterday’s Earnings Extra (PRO subscribers only).
Gentoo Media
The end of the long tail: After recording a fall in top-line revenues for the first time in five years, CEO Jonas Warrer said the company has moved to focus on ~70 of its top websites, with less active sites left to die on the vine.
See Wednesday’s Earnings Extra (PRO subscribers only).
Bragg Gaming
Get along without you now: A perilous over-reliance on one key customer in one key market has been successfully dodged by Bragg Gaming, which noted that its revenue dependence derived from its comprehensive platform deal with BetCity in the Netherlands had hugely declined.
See today’s Earnings Extra to be sent later today (PRO subscribers only).
Earnings in brief
High Roller Technologies: Revenue was up 4% to $6.8m while net losses increased to $3.3m. CEO Ben Clemes said it was now executing on a strategic plan and staff reorg to “focus exclusively on high-potential regulated markets.” The company said it has successfully submitted an initial licensing application in Ontario.
Ahead of the completion of the buyout by Apollo, Everi revenues fell 4% in Q1, with gaming revenues down 12% to $85.7m but fintech revenues up 3% to $95.6m. Operating losses fell to $6.8m.
Sega Sammy: FY24 revenue fell 8.5% YoY to $2.9bn but adj. EBITDA was up 14% to $422m. Revenue fell due to falls in the Pachislot and Pachinko business in Japan. The company said the completion of the deal to buy GAN would occur in the current quarter and noted it had already completed the Stakelogic buyout.
Ainsworth Game Technology said H1 revenues would be ~8% ahead of last year’s total of A$143m ($91.6m) while adj. EBITDA is expected to be "similar" to the A$26.8m total in the prior-year period. Recall, Ainsworth is subject to a bid from Novomatic to acquire the remainder of the company it does not own, a bid that an Ainsworth family member and shareholder said undervalues the business.
Bet-at-home: Revenue grew 15% to €13.5m in H1 while adj. EBITDA grew to €1.6m from just €200k this time last year. The company warned, however, that the increase in betting tax in Austria from 2% to 5% on April 1 would result in a “significant burden” on NGR. It said FY25 GGR was estimated at €46m-€54m with adj. EBITDA at between zero and €4m.
Venture capital firm Yolo Investments manages in excess of €500m in capital across 100 exciting fintech, gaming and blockchain companies. The Yolo Investments' Gaming fund, regulated by the Guernsey Financial Services Commission, has taken positions in fast-growth suppliers and operators, including Dabble and Enteractive. Yolo Investments (yolo.io) wants to hear from readers of this newsletter. Get in touch with your pitch, or for a chat about innovative products which can plug into our investment ecosystem.
Robins fireside chat
Cattle prod: DraftKings CEO Jason Robins reiterated his message that he believes the biggest impact of the rise of prediction markets will be the extent to which it is “creating real urgency” among states that don’t have either OSB or iCasino.
“All of a sudden, if you’re a state which hasn’t taken action yet, this is a very compelling reason that you would want to establish a state regulated framework.” he told investors at the MoffettNathanson conference yesterday.
“Anything that forces that issue creates opportunities,” he added.
The simple things you see are all complicated: He added that he didn’t think prediction offerings were a threat to his business, despite prediction markets being a plausible “substitute” in states that don’t already have sports betting.
“If you look at the products, they’re very nascent and don’t have any of the bells and whistles,” he said.
“They’re very bare bones in terms of markets,” he added. “That’ll change, but creating things like parlays is going to be hard in a format like that. It’s peer-to-peer. I don’t think it’s apples to apples.”
Asked whether he would launch a predictions platform, Robins said DraftKings “was watching and evaluating” and suggested it was “early days” on the court cases and “how this would ultimately play out.”
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Connections
Merkur Bets is taking over Tipwin’s products in its sports-betting shops in Germany under a comprehensive agreement between the companies. VIP Play has launched its mobile app in Tennessee. Agreegain has received a software supplier license from the Isle of Man. Inspired Entertainment has launched V-Play Football Brazil in partnership with Kaizen Gaming.
Games Global’s Hard Rock Splash ‘n Spin Link&Win slot game is now available on Hard Rock Bet in New Jersey under an exclusive partnership. TaDa Gaming has received approval to operate in the UK. 3 Oaks Gaming’s online games are now available in Italy on Novomatic’s AdmiralBet. R. Franco Digital’s slot games are now available on Lebull.pt’s platform in Portugal.
Top ranking
Material upside: It is rare that any UK gambling company gets to celebrate a move made by the government but such is the case this week with Rank, which finally saw the statutory instruments published that will allow it to increase the number of gaming machines at its Grosvenor Casino estate.
The announcement this week from DCMS said the government was to move to the implementation stage of its land-based gaming reforms in July.
The legislation will also allow casinos to offer sports betting on premises.
Order incoming: Rank welcomed the news and said it would be adding 822 gaming machines to its current footprint of 1,376 machines “in the coming months.” The company said the total opportunity within our current estate is 3,112 machines, “requiring investment in our casinos that we would expect to gradually complete over the next two to three years.”
Rank CEO John O’Reilly was equally welcoming. “The publication of the statutory instruments for land-based casino reforms is very good news for Rank,” he said.
“The modernisations will enable us to improve the Grosvenor customer proposition, helping to grow jobs and generating investment in local communities.”
The analysts were also positive. Peel Hunt said the company has “already demonstrated its ability to extract material returns on its upgrade capital investment.”
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