Portnoy Allegations, Earnings Shortfall Hammer Penn National Stock
Penn National Gaming (Nasdaq: PENN) lost about $2.2 billion from its market cap today, as shares plunged more than 20% on disappointing earnings and an expose´ on Barstool Sports founder David Portnoy that detailed sexual encounters three women called abusive.
Of the 20% move, “Five percent [points] is earnings, and 15 is Portnoy risk,” said an equity analyst who spoke on the condition of not being named because company compliance wouldn’t approve his comments.
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Penn, which operates casinos and sports books and owns 36% of Barstool Sports, reported its third quarter results prior to the market open today. Earnings per share were 52 cents, short of the lowest Wall Street analyst estimate and well below the consensus expectations of 89 cents a share, even as revenue came in as expected at $1.5 billion. Penn management blamed the impact of the Delta variant and Hurricane Ida, which shuttered casino operations for a time along the Gulf Coast.
“On the core business side, the third quarter was really a tale of two halves,” with pre-Ida results beating 2019’s comparable period, said CEO Jay Snowden on the earnings call. Penn’s outlook also likely affected sentiment as well, with management saying they don’t expect sports betting action in the Canadian province of Ontario to start adding to the bottom line until the middle of the first quarter of 2022, from a prior expectation of year-end. Penn just closed a $2 billion purchase of Score Media to access the Canadian market.
Having closed Wednesday over $72, shares declined on the results to about $63 by midmorning, when Business Insider published its story on Portnoy. The story quoted three women who had sex with the Barstool Sports founder, encounters they characterized as being frightening and affecting their mental health. Selling volume picked up after the story’s release, with shares bottoming at $56.35 during trading. They recovered slightly to finish at $57.40. That still left Penn National as the worst percentage performer in the S&P 500 Thursday.
Portnoy posted a video response on Twitter, in which he called the story a “hit piece” and denied the allegations. “I’ve never done anything weird with a girl ever. Never anything remotely non-consensual,” he said.
Penn National has the right to purchase the remainder of Barstool Sports it doesn’t own. A company spokesperson didn’t respond to emailed request for comment.
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