• One well-known investor reduced his stake in Penn Entertainment
• Another trimmed his MGM position
• DraftKings was dropped outright by another hedge fund

Form 13F filing season is now in full swing and the documents are confirming some well-known hedge fund managers are reducing exposure to casino stocks.

Corvex Management founder Keith Meister. MGM Resorts International, of which he’s a board member, was among the casino stocks, pared by hedge funds in the third quarter. (Image: Bloomberg)

In a Form 13F released on Friday, it was confirmed that David Einhorn’s DME Capital Management modestly reduced its position in regional casino operator Penn Entertainment (NASDAQ: PENN). Einhorn’s hedge fund now owns approximately seven million shares of that casino stock, down from about 7.5 million. DME’s third-quarter reduction to its Penn stake arrived after the money manager significantly increased its position in the stock in the prior quarter.

Penn remains the only gaming stock currently found in the DME Capital portfolio and the hedge fund’s reduced position in the shares was revealed after the gaming company announced it’s ending the ESPN Bet partnership.

During the next three years, we see the company’s debt/adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) averaging 2.8 times, driven by improving profitability at its interactive business, which will be aided by the termination of its partnership with ESPN in December 2025, which required it to invest $150 million annually in marketing,” observes Morningstar’s Dan Wasiolek.

When Penn reported third-quarter results last week, it announced the early termination the ESPN Bet agreement — a move widely applauded by analysts.

Meister’s Corvex Slightly Reduces MGM Stake

Another casino stock that was subject to some third-quarter pruning by at least one hedge fund was MGM Resorts International (NYSE: MGM).

Corvex also slashed its position in Barry Diller’s IAC/InterActiveCorp (NASDAQ: IAC) to about two million shares from 2.7 million. IAC is the largest MGM shareholder.

Meister remains a member of the casino company’s board of directors.

DraftKings Dropped by Whale Rock

Beyond casino stocks, other gaming names were subject to third-quarter selling by hedge funds. For example, Whale Rock Capital Management completely eliminated its stake in DraftKings (NASDAQ” DKNG).

13F filers are not required to articulate why they’re buying or selling various securities so it’s not clear if Whale Rock’s departure from DraftKings was motivated by prediction markets headlines or news that the operator and its rivals have been beset by bettors’ NFL success.

It wasn’t all bad news for DraftKings as a separate regulatory filing confirmed Director Harry Sloan bought 25,000 shares of the gaming stock, boosting his holdings to 249,712 shares.

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