The ESPN Bet app on a smartphone installed in New York, U.S., Thursday, February 22, 2024.
Gabby Jones | Bloomberg | Getty Images
Penn Entertainment will lay off around 100 employees as it focuses on growing ESPNBet.
Chief Executive Officer Jay Snowden told staff members in an internal email that the changes will improve operational efficiency following its 2021 acquisition of Canadian media and gaming powerhouse theScore.
The company employs around 20,000 people.
“When PENN acquired theScore, we immediately began working on building our own technology stack and migrating our sportsbook to theScore's best-in-class platform,” Snowden wrote in the memo, which was obtained by CNBC. “This led us to temporarily set aside any potential organizational changes that would normally follow a major acquisition.”
Penn went on to say that it is embarking on a new phase of growth in its interactive business, which includes ESPNBet, a $2 billion brand partnership with From Disney ESPN. Snowden said the initiatives include product improvements and deeper integration into the ESPN ecosystem.
Investors are eager for Penn to flex its muscles with the new sportsbook, and activist investor Donerail Group has called on the board to sell the casino company.
There have been rumors of possible interest from many other online gaming companies and brick-and-mortar casinos.
Truist gaming analyst Barry Jonas wrote in a note Thursday that a sale is unlikely to happen anytime soon due to the complexity of a transaction that would likely involve significant divestitures.
Penn's launch of new ESPNBet features this fall during football season should significantly improve its product, Jonas said, and a focus on costs indicates the company's commitment to seeing its investments pay off.
Penn's stock has plunged 25% so far this year. It has missed earnings expectations in the past two quarters and has cut its outlook.
“Investors are still wondering what success for ESPN Bet might look like and how much additional investment (beyond what is recommended) will be required to achieve it,” Jonas said.
Truist has a buy rating on Penn and a $25 price target.
