The PENN Entertainment PENN partnership with sports media company ESPN includes the divestiture of Barstool Sports, returning the company to its founder Dave Portnoy.
Penn is selling 100% of Barstool Sports back to Portnoy in exchange for “certain non-compete and other restrictive covenants.”
The transfer back of Barstool Sports comes months after Penn acquired the remaining stake in the sports media company it did not own. In total, Penn paid over $500 million to acquire Barstool Sports through transactions in 2020 and 2023.
Here's what Portnoy is saying in the wake of Tuesday's industry-rattling announcement and what the deal means for the future of Barstool Sports.
Related Link: Penn Entertainment Analysts On 'Landscape-Changing' Sports Betting Deal With ESPN: 'This Move Makes Sense'
Penn, Barstool 'Underestimated' Regulatory Challenge: Portnoy hosted an "Emergency Press Conference" Tuesday as the deal was being announced by Penn.
“Maybe the biggest emergency press conference we’ve ever had at Barstool Sports,” Portnoy said. “PENN Entertainment and Barstool Sports have gone our separate ways.”
This is the first time Portnoy, 46, has owned 100% of Barstool Sports in over a decade, he said, as Chernin Group previously owned a stake before Penn Entertainment.
The Barstool Sports founder said he has nothing but great things to say about Penn Entertainment and the companies previously did the deal to take things to the moon.
“We underestimated how tough it is for me and Barstool to operate in a regulated world.”
The deal with ESPN is a win-win for Penn, Portnoy said, adding that he will likely continue to hold the Penn shares that he owns.
Penn was denied licenses due to the Barstool Sports brand and Portnoy being targeted by several media hit pieces, he said.
“The regulated industry is probably not the best place for Barstool Sports and the type of content we make.”
With Barstool Sportsbook now privately held, Portnoy said the company doesn’t have to watch what it says or does and can get back to being the place for content.
Portnoy also brushed off the potential of selling Barstool Sports again.
“I am never going to sell Barstool Sports, I’ll hold it ‘til I die.”
Under the terms of the deal with Penn Entertainment, the casino and sports betting company will get 50% of any sale proceeds or dividends Barstool Sports pays out.
Foreshadowing the Deal: In May, Benzinga reported that Portnoy’s contract with Barstool Sports under Penn Entertainment had not been renewed.
“My contract’s done in 20 months,” Portnoy said in an interview at the time. “There’s been some talk about it.”
Portnoy said in the interview that an extension with Penn Entertainment may not be reached.
The comments by Portnoy came at a time when the Barstool Sports founder had spoken out against Penn Entertainment for the way it handled former Barstool employee Ben Mintz.
Portnoy said he was grateful that Penn took a chance on Barstool when other gambling companies wouldn’t, but added he disagreed with Penn CEO Jay Snowden’s decision to fire Mintz over the latter’s rapping a racial slur on a live stream.
'That's Why Penn Wants Out': Workweek CEO Adam Ryan shared a thread on Twitter that covered the timeline of Barstool Sports being sold to Penn and acquired back by Portnoy.
“Portnoy acquired 100% of the brand back for $0. But that’s not the whole truth,” Ryan tweeted.
Penn’s deal with ESPN gives them a wider reach and could help alleviate issues with regulators over the Barstool Sports brand and its “pirate ship attitude,” he said.
“That’s why Penn wants out. It makes sense strategically, financially, and operationally to align with ESPN.”
The deal being characterized as Penn returning Barstool Sports for zero isn’t exactly true, as it comes with several clauses, Ryan said.
“Part of the deal is that Barstool has a noncompete with Penn. Before the Penn acquisition, the largest advertising client of Barstool was sportsbooks. Now, no money is coming in from their best profile of clients, which puts constraints on the business.”
Another clause is that Barstool cannot launch its own sportsbooks, something Ryan said Portnoy is unlikely to do again due to regulators.
“It does cap the business’s potential.”
Action Network’s Darren Rovell said the partnership between Penn Entertainment and Barstool Sports wasn’t working.
“Stoolies skew younger and have a lower net worth, meaning they have a shorter gambling outlook and fewer dollars to play with,” Rovell said.
Rovell also cited issues around the behavior of Barstool Sports employees and disciplinary actions from Penn. Barstool’s marketing of “Can’t Lose Parlays” also came into question by regulators, which may have hurt Penn, Rovell added.
On Wednesday’s earnings conference call, Snowden may have summed up the Barstool Sports brand best.
“It became obvious to both parties that there’s only one natural owner of Barstool Sports and that’s Dave Portnoy,” Snowden said, as reported by Rovell.
Read Next: Why Investors Are Dumping DraftKings Stock
Photo by Zach Catanzareti Photo via Wikimedia.
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.
