It’s clearly too early to know if PENN Entertainment’s decision to jettison the Barstool Sportsbook brand in favor of ESPN as its mobile sportsbook brand will work out. There will certainly be winners and losers in this decision, and the ramifications may not be known for years.
But according to numerous observers of the sportsbook industry space whom Sports Handle asked about the deal, there is one big winner in all this: Dave Portnoy, the founder — and once again 100% owner — of Barstool Sports.
“Portnoy is probably one of the 10 biggest individual winners post-PASPA,” said Chris Grove, the partner emeritus and strategic advisor at Eilers & Krejcik Gaming, a gaming research company. “He’s not in [DraftKings CEO] Jason Robins or [Flutter CEO] Peter Jackson territory, but there are far, far, far more names behind him than ahead of him. He got the money, an incredible face-saving exit, and ended up with a bigger and more valuable Barstool than he had before the PENN misadventure started.”
At first blush, it may seem Portnoy is a big loser in this deal. After all, Barstool Sportsbook is one of the biggest — if not the biggest — sportsbook flops in the post-PASPA era. PENN spent $551 million over a period of several years to complete the acquisition of Barstool Sports and use the brand, only to give it up after the sportsbook failed to reach the top tier of operators. The sportsbook is to be rebranded as ESPN BET in November under the new PENN-ESPN partnership.
Furthermore, Portnoy saw his name repeatedly invoked in a negative light, most notably in a New York Times piece that detailed a previously unreported bankruptcy.
And despite getting Barstool back for $1, as detailed in PENN’s quarterly filing with the Securities & Exchange Commission, Portnoy didn’t get it back free and clear. He signed a non-compete agreement, details of which are not publicly available, and if he ever sells Barstool in the future, he’ll have to fork over 50% of the proceeds to PENN. Veteran gambling industry journalist Jessica Welman of SBC Gaming shared additional information and speculation on this topic Thursday:
Charles Gillespie of @gambling_com might know something the rest of us don't know. On the earnings call he said Barstool is not supposed to take money from gambling companies as part of the non-compete, which I assume includes being an affiliate?
— Jessica Welman (@jesswelman) August 17, 2023
But the positives seem to outweigh and overwhelm the negatives. Portnoy gets his company back from PENN for a buck after pocketing untold millions from selling his company to PENN in the first place. Sportico reports that details of Portnoy’s wealth from the deal are unknown, but it estimated he got $150 million from the sale and may be holding upward of a million shares of PENN stock (currently trading at $24 and change).
Mo’ money, less problems
“Portnoy effectively sold a call on his company, getting a ton of money to give it up for a short period, and getting it back 100 percent,” observed Alan Woinski, the CEO of Gaming USA Corp.
In addition to the money, Portnoy also now gets out from under the wagering regulatory world and is, once again, free to say — and do — whatever he pleases. His background had created headaches for PENN and Barstool Sportsbook with regulators in multiple states, including Barstool’s home state of Massachusetts. As Portnoy noted himself, this is the first time in a decade that he holds full control over the company he started as a four-page sports newspaper more than 20 years ago.
Emergency Press Conference – I Bought Back Barstool Sports pic.twitter.com/dmUk0eNowx
— Dave Portnoy (@stoolpresidente) August 8, 2023
“Dave Portnoy is an obvious winner in the PENN/ESPN deal. We should all wish to sell a company for over $500 million and buy it back for $1,” said Lloyd Danzig, the managing partner of Sharp Alpha Advisors. “While Barstool Sportsbook failed to achieve significant market share, it’s not clear that this was due specifically and solely to audience composition.”
And, as Woinski puts it, Portnoy can — and will — simply let this roll off his shoulders.
“He keeps his name out there, makes millions, keeps his company,” he said. “And he can just shrug off that Barstool just is not the right fit for a regulated industry.”
Still, Brendan Bussmann, the managing partner of Las Vegas-based gaming consultancy B Global, points out that Portnoy “coming out a winner” didn’t come easy and points to issues during Portnoy’s PENN partnership that changed the industry.
“While Portnoy, Barstool, and PENN came out on top, they do have the lingering effects from an effort by a vocal minority that did everything possible to discredit him through either the press or with regulators, even going so far as pouring kerosene on the industry,” Bussmann said. “While that might not have been the battle for Portnoy to win, he won in the end.
“As Stone’s Rules say, ‘The only thing worse than being talked about is not being talked about.’ Portnoy is the epitome of this. And in the end, he was right. No one could regulate Barstool.”
In another time …
“I think Dave Portnoy is one of the luckiest men alive,” said longtime casino executive (and Sports Handle contributor) Richard Schuetz. “Many of the more traditional firms would not have touched him for fear of regulatory issues. PENN hung with him forever, even after many people — such as myself — thought the hunt was over when the Massachusetts folks got on his ass. Dave should thank God, bank all of his millions, and go enjoy his life. He caught a dream shot from PENN, and no one will make that mistake again.”
As a mild counterpoint, Schuetz believes Portnoy is now “untouchable” in the gambling industry, and if this were a previous time — namely, when sports betting was contained to Nevada — there would have been zero chance Portnoy would have been allowed to be part of the industry, due to what became known as the “suitability test.”
“The reason for the background investigation was to ensure of no bad past associations or behaviors, for these could hurt the brand of the industry,” said Schuetz, who spent two years writing a Ph.D. dissertation on the subject. “The language that generally surrounds this is that the person needs to be found to be a person of good character, honesty, and integrity. … Back in the day, [Portnoy] would be a huge dog to be allowed to associate with and help shape the brand of the industry.”
But in today’s world? Portnoy was able to leverage his name and his company into a deal that turned into a steal.
“Very seldom do you get a second act with the same company,” Bussman said. “Portnoy is able to do that with Barstool, and he comes out of it back on top.”