PENN Entertainment, which has been mired in acquisition speculation in recent weeks, will conduct a round of employee layoffs this week, according to an internal letter released by CEO Jay Snowden on Wednesday.

The planned changes, according to the memo, will enable PENN Interactive, the company’s digital unit, to “streamline reporting lines, enhance operational efficiencies, and leverage shared resources” across the company, Snowden wrote. The layoffs include numerous employees whose job responsibilities focused on ESPN BET, Front Office Sports reported. While PENN Entertainment has not disclosed the number of employees who will depart, the changes will result in a “limited number of team member separations,” Snowden added.

“Our interactive business, which is a core pillar of PENN Entertainment, is well-positioned and we continue to add capabilities and key talent to advance our digital growth strategy. This includes building upon our partnership with ESPN with upcoming product enhancements and a deeper integration into the ESPN ecosystem.”

The company did not disclose the number of digital employees at PENN Interactive who will be impacted by the workforce changes. Dustin Gouker, a veteran casino industry writer, first reported the departures. One departing employee impacted by the changes told Gouker that the total is a considerable amount.

The changes come as PENN approaches the one-year anniversary of the announcement of its partnership with ESPN BET. Under the multi-year agreement, PENN will pay ESPN up to $1.5 billion, along with the option to acquire $500 million in warrants. The 10-year agreement includes an opt-out clause after three years.

The launch of ESPN BET marked the first time a mainstream global sports network lent its imprimatur to a sportsbook brand. Given the network’s universal name recognition, ESPN BET debuted with high expectations last November. One venture capitalist, Seventy-Six Capital’s Wayne Kimmel, told Sports Handle last fall that he expects the operator to eventually vault to the pole position in the nation’s sports betting rankings.

— Dustin Gouker (@DustinGouker) July 17, 2024

From a market share perspective, however, ESPN BET continues to lag behind top rivals. In terms of gross gaming revenue, ESPN BET’s market share in the second quarter declined sequentially to 3.2%, according to research from JMP Securities analyst Jordan Bender. ESPN BET reported a national market share of 4.7% during the first quarter, its first full quarter since the launch. By comparison, FanDuel and DraftKings reported a combined market share of 78.7%, with the former commanding a nation-leading 45.9% share over the first three months of the year.

In a mid-month update released Wednesday, Bender provided new data on six of the nation’s top sportsbooks. Figures from Hard Rock BET, Fanatics Sportsbook, and bet365 were excluded from the report. Although ESPN BET’s market share continues to decline, the operator posted gross gaming margins of 8.4% in the quarter, up from 5.4% over the first three months of 2024. The increase underscores ESPN BET’s sustained improvement in the operator’s business model through progression in risk, trading, and product offerings, he noted. In fact, ESPN BET ranked second among the six operators in June, trailing only FanDuel (12.3% margins) in the category.

In June, PENN shares jumped following reports that Boyd Gaming approached the company with a potential acquisition bid. Soon after, subsequent reports followed that Flutter was “sizing up” certain PENN assets as an exploratory measure. A potential acquisition of ESPN BET by Flutter could create reverberations for a sports betting market already downsized by rapid consolidation. Boyd Gaming owns a minority stake in FanDuel Group estimated at approximately 5%. It should be noted that tri-party deals are rife with complexity and are difficult to complete.

Prior to the Boyd rumors, Donerail Group, an activist investor, issued a letter to PENN shareholders in an attempt to buttress support for a possible sale of the company. Irked by a spending spree from PENN’s digital unit, Donerail has called on the company to exercise greater fiscal restraint. Months earlier, hedge fund HG Vora urged PENN to modify its staggered term structure for re-electing board members, while expressing discontent with the company’s “persistent underperformance” on equities markets.

The staffing changes will also occur ahead of PENN’s second-quarter earnings results early next month. In June, PENN announced that the company will release the results on Aug. 8, several weeks before the start of the college football season. PENN ticked up to $19.50 on Thursday morning, posting fractional gains.

PENN shares have fallen approximately 34% since last year’s ESPN BET announcement, but are up considerably since testing 3-year lows in April. At the time, PENN traded around $13.50 a share, hovering around its lowest level in the post-pandemic era.