Penn Entertainment Now Owns 100 Percent of Barstool Sports

Posted on: August 17, 2022, 04:50h. 

Last updated on: August 18, 2022, 12:44h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

Penn Entertainment (NASDAQ:PENN) has exercised its rights to acquire all of Barstool Sports. That means David Portnoy’s media outfit will become a wholly owned subsidiary of the gaming company.

Penn Barstool
Barstool Sports founder David Portnoy, seen above. Penn Entertainment is exercising rights to acquire 100% of the media entity. (Image: Politico)

The company, previously known as Penn National Gaming, said in January 2020 that it was shelling out $163 million in cash and equity to take a 36% stake in the sports and pop culture blog. Under the terms of that agreement, the casino operator gained rights to increase its Barstool stake to 50% for another $62 million payment and eventually own the media property outright for a total of $450 million.

As previously disclosed, 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 casino firm revealed today in a Form 8-K filing with the Securities and Exchange Commission (SEC).

The transaction is scheduled to close in February 2023, Penn noted in the regulatory document.

Portnoy Power

Due in part to Penn’s investment in and now acquisition of Barstool, Portnoy’s net worth is estimated to be $80 million to $120 million.

With the $450 million valuation, Portnoy isn’t the only one reaping a windfall. The Chernin Group (TCG), a California-based investment firm specializing in media companies, made a $25 million investment in Barstool in 2016 and 2018, valuing the media property at $10 million to $15 million and then at $100 million.

While Portnoy holds no official executive role at Penn and is no stranger to controversy, it’s also accurate to say he’s a big part of the reason the regional casino giant invested in the media entity in the first place. Some analysts and investors view Portnoy as the face of Penn. While that’s up for debate, there’s no arguing he and some other early members of the Barstool fraternity are key drivers of publicity for Barstool Sportsbook.

Barstool Sportsbook hasn’t yet reached the heights of FanDuel or DraftKings. But the Penn online sportsbook is leveraging Portnoy and other Barstool personalities to acquire younger customers cost-effectively — a meaningful trait, as some rivals spend heavily on marketing.

Good Time for Penn to Make the Move

Earlier this year, Penn CEO Jay Snowden said the company plans to fully acquire Barstool Sports in early 2023, meaning today’s news confirms the move happened ahead of schedule.

The aforementioned regulatory filing doesn’t include a reason as to why the transaction timeline is being accelerated. But one possible reason is Penn’s interactive business, including Barstool Sportsbook, is nearing profitability.

In a note to clients today, Roth Capital analyst Edward Engel said Penn Interactive could achieve profitability in the fourth quarter. He rates Penn “neutral,” with a $40 price target.