Shares of Penn Leisure (NASDAQ: PENN) jumped 2.4% Wednesday on quantity that was 55.7% above the every day common after David Einhorn disclosed that his Greenlight Capital took a “medium sized” stake within the regional on line casino operator within the first quarter.
Greenlight Capital founder David Einhorn on the World Collection of Poker. His hedge introduced a brand new stake in Penn Leisure. (Picture: Institutional Investor)
In a letter to the hedge fund’s shoppers, Einhorn mentioned Greenlight established a place in Penn at a median value of $22.69, properly above the inventory’s closing value of $17.84. The shares are off 24% over the previous 90 days and 31.4% yr so far, making Penn one of many worst-performing gaming equities over these intervals. Einhorn argued markets are assigning adverse worth to Penn’s ESPN Wager unit, however he sees potential in that section.
It’s honest to say that after the Barstool fiasco, traders have critical doubts concerning the firm’s technique and administration’s competence to execute,” Einhorn wrote within the letter. “Have been the market to credit score PENN with merely 15% of DraftKings’ worth, the section alone could be price $20 a share.”
On Monday, Penn introduced the hiring of former Walt Disney (NYSE: DIS) govt Aaron LaBerge as chief know-how officer (CTO) — a transfer that might bolster the interactive division, together with ESPN Wager. ESPN Wager debuted final November.
Einhorn Sees Worth in Penn’s Land-Based mostly Casinos
Since Penn took a now-eliminated stake in Barstool Sports activities in January 2020, many market contributors have seen the operator as an internet gaming play whereas ignoring its brick-and-mortar regional casinos.
That shouldn’t be the case. Whereas the temporary marriage with Barstool Sports activities and the current launch of ESPN Wager are headline turbines, and the latter could possibly be materials to the long-term Penn funding thesis, the truth is the corporate generates the majority of its earnings and income from land-based casinos. Einhorn believes markets aren’t assigning enough worth to that aspect of the enterprise.
“PENN’s present enterprise worth is simply over $4.3 billion, and based mostly on 8-12x a number of of free money movement, we valued their land-based casinos between $4.3 billion and $7 billion,” wrote the Greenlight founder.
Even at $4.3 billion, the low finish of the vary talked about above, that’s a considerable premium to Penn’s present market capitalization of $2.53 billion.
Einhorn’s Greenlight is No Stranger to Gaming Shares
Einhorn’s Greenlight joins HG Vora because the well-known hedge funds which have just lately taken stakes in Penn. Final December, HG Vora mentioned it took an curiosity of 18.5% of Penn’s shares excellent and demanded board seats in an effort to push for change on the gaming firm.
For its half, Greenlight can also be acquainted with gaming equities, having beforehand held quite a few positions throughout the business, together with in corporations born out of blank-check offers, together with Genius Sports activities (NYSE: GENI) and Playstudios (NASDAQ: MYPS). There was additionally hypothesis {that a} brief place in DraftKings (NASDAQ: DKNG) could have been among the many contributors to the hedge fund’s spectacular 2022 efficiency.
Einhorn himself is an achieved poker participant. In 2012, he completed third within the World Collection of Poker, successful $4.35 million within the course of.
