Skip to main content

Penn National Shares Slump on Stock Sale Plans, Macquarie Downgrade

Gaming group Penn National will sell around 14 million in new shares as it ramps-up its sports betting challenge to rivals such as DrafKings and FanDuel.

Penn National Gaming Inc  (PENN)  shares slumped lower Thursday following plans to issue new common stock and a downgrade from analyst at Macquarie.

Penn National said it would issue up to 14 million in new shares at an undisclosed price, with the group using the cash raised for 'general corporate purposes'. Its current float of outstanding shares is around 131 million, and its market cap based on last night's closing price was around $9.5 billion. Goldman Sachs, BofA Securities and JPMorgan will act as joint book-running managers for the deal, Penn National said.

The sale plans followed shortly after a research note from Macquarie analyst Chad Beynon, who lowered his rating on the gaming group to 'neutral' from 'outperform', but bumped his price target $10 higher to $66 per share, citing its high levels of leverage on its property leases and an upcoming 'arms race' in marketing spend with online gaming groups DraftKings  (DKNG) .

Penn National shares were marked 5.2% lower in early trading Thursday to change hands at $65.50 each, a move that would still leave the stock nearly 400% higher over the past six months.

Casino operator Penn National has made a significant push into sports betting this year, following its earlier purchase of a 36% stake in Dave Portnoy's Barstool Sports, which produces blog posts, podcasts, social media and live events.

Earlier this month, Rosenblatt analyst Bernie McTernan said Penn National could become the "market leader" in online sports betting if it could leverage its Barstool Sports brand "with a best-in-class and differentiated app."

Penn National "has the potential to gain significant share in online betting, driven by their partnership with Barstool providing a differentiated customer acquisition strategy," McTernan noted, adding that "while we continue to expect DraftKings and FanDuel to be leaders in the online betting space given their first-mover advantages ... Penn could already have their ear, an envious position."