Enigmatic hedge fund investor builds position in Penn Entertainment

Lea Hogg April 25, 2024

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Enigmatic hedge fund investor builds position in Penn Entertainment

David Einhorn, co-founder of Greenlight Capital and a seasoned hedge fund investor, has strategically invested in Penn Entertainment amidst market volatility. This significant investment, made in the first quarter of this year, is a part of Einhorn’s ongoing efforts to diversify his portfolio.

Einhorn’s investment in Penn Entertainment has sparked curiosity about the future governance of such gambling giants. The trend of activist hedge funds influencing casino operators is reshaping the industry, and Einhorn’s recent move aligns with this shift. Given his style of investment history, insiders say it’s plausible that Einhorn may take an active role in Penn’s governance. As these developments unfold, the casino sector is keenly observing the potential implications. The question that lingers is whether the future of the gambling industry will be dictated by the strategic moves of hedge funds.

In a similar vein, HG Vora Capital Management, an activist hedge fund led by former Goldman Sachs banker Parag Vora, also took a proactive stance in Penn Entertainment. With an 18.5 percent stake in the company, HG Vora also requested the appointment of directors to Penn’s board, signalling its intent to influence the company’s decision-making. This move came following concerns over Penn Entertainment’s undervalued stock, which experienced a 16 percent decline throughout 2023. Vora expressed dissatisfaction with the company’s board structure and strategic direction, calling for immediate changes.. The intervention led to a nearly immediate 4.8 percent surge in the share price. This move ignited discussions about the influence of hedge funds on the governance of gambling giants.

Einhorn’s investments

Over the first quarter of this year, Einhorn has been building a significant stake in Penn Entertainment. Despite the stock’s value declining from $22.69 to $17.44 per share, largely due to investor skepticism following Penn’s challenging acquisition of Barstool Sports, Einhorn remains optimistic. He sees potential in sports betting and believes that if Penn executes it correctly, it could significantly boost the company’s shares.

In the fourth quarter, geopolitical risks led Einhorn to pause his new stock acquisitions, a move he referred to as a “buyer’s strike”. Despite this, his hedge fund managed to yield a 4.9 percent return in the first quarter of 2024, contrasting with the S&P 500’s 10.6 percent gain during the same period.

Einhorn’s investment prowess extends beyond Penn Entertainment. He revealed a first-quarter stake in HP, anticipating an AI-driven personal computer adoption cycle. He also ventured into the biotech sector, taking new stakes in Roivant Sciences and the Class A shares of Liberty Global (LBTYA).

Einhorn’s strategies reflect his adaptability and foresight in a volatile market. His faith in Penn Entertainment’s potential in sports betting, coupled with his investments in tech and biotech sectors, underscores his vision for future market trends. As the gambling market, particularly sports betting, continues to evolve, it will be intriguing to see how Einhorn’s investments unfold. Will the future of the gambling industry be dictated by the strategic moves of hedge funds like Greenlight Capital? The answer remains to be seen.