PENN is Portnoy and Portnoy is PENN.
PENN Entertainment exercised its option to fully own Barstool Sports on Wednesday, bringing the valuation of Dave Portnoy’s upstart media outlet to $450 million and solidifying its controversial founder as the definitive face of PENN’s sports wagering platform, Barstool Sportsbook.
PENN made the announcement via an 8-K filing with the Securities and Exchange Commission. When known as Penn National Gaming in February 2020, it initially closed on a deal to purchase 36% of Barstool Sports for $163 million. with an option for eventual full ownership. That deal lifted Portnoy from burgeoning national sports media presence into the sports wagering mainstream as the key promoter of a major sportsbook.
Per its quarterly report, filed with the SEC on Aug. 4, PENN had announced its decision to purchase $62 million worth of Barstool Sports common stock to raise its ownership to 50% prior to Wednesday’s filing.
PENN Entertainment, Inc. (“PENN” or the “Company”) has call rights with respect to all of the outstanding shares of common stock of Barstool Sports, Inc. (“Barstool”) not already owned by PENN. PENN has exercised these call rights to bring its ownership of Barstool to 100%. The acquisition of the remaining Barstool shares is expected to be completed in February 2023, after which Barstool will be a wholly-owned subsidiary of PENN.
The announcement that it will complete the purchase in February comes slightly more than one year after PENN initiated purchase of Score and Media Gaming, headquartered in Toronto with its Canadian-based sportsbook known as theScore, for $2 billion. PENN is continuing theScore as its brand for sports betting in Ontario, which launched legalized single-event wagering and iGaming in April, while using the Barstool brand for U.S. operations.
Barstool connotes success and controversy
Barstool Sportsbook is available for mobile sports wagering in 12 states and iGaming in four states. It enjoys varying degrees of success, though it was not among the initial nine mobile books in New York.
Its best-performing state in terms of sports wagering handle market share is arguably Michigan, where Barstool’s tether to Greektown Casino in Detroit helps put it at the top of a second tier of operators behind industry leaders FanDuel, DraftKings, and BetMGM. It has also carved out definitive niches in top-five markets Pennsylvania and Illinois, clearing $1 billion in all-time handle in the former this year while on the verge of $50 million in revenue since launching in March 2021 in the latter.
Barstool Sports and Portnoy continue to provide PENN a valued differentiator in the highly competitive sports wagering market — his ability to reach a target audience via social media platforms without the lavish traditional media advertising spend continues to be without equal. The downside of that extensive reach has sometimes come in controversial fashion, usually revolving around the embrace of “bro culture” that resonates with a large portion of the demographic Portnoy and Barstool have actively cultivated over the years.
Portnoy filed a defamation lawsuit in February against Business Insider following the publication of two stories detailing his sexual encounters with allegations of violence. The first article, published in November 2021 and emphatically rebutted by Portnoy via video released on Twitter, was released at roughly the same time of a poor quarterly earnings report for PENN, which saw nearly $2.7 billion of its market cap wiped out at the time.
The stock, which plummeted to $57.40 after that earnings report, was trading at $35.50 as of 9:40 a.m. ET Thursday. That is notably higher compared to its 52-week low of $26.46 in June but well off its 52-week high of $86.40 achieved last September.
PENN CEO Jay Snowden in public remarks has consistently defended Portnoy and lauded Barstool as an asset to the broad gaming company, and he made clear on a second-quarter earnings call this month that PENN had every intention of going forward with its full Barstool purchase.