Back in January 2020, casino company Penn Entertainment purchased a minority stake (around 36 percent) in Barstool Sports for $135 million in cash and $28 million in stock. That deal came with a commitment for Penn to increase its stake to 50 percent in 2023, and with options for them to buy either control or full ownership at that time based on fair market value. A lot has changed since January 2020 in the media landscape, in the gambling landscape, and with Barstool itself, but Penn has now decided to take that full ownership route, paying $388 million to acquire the outstanding equity in Barstool. Here’s more on that from a release:
PENN Entertainment, Inc. (Nasdaq: PENN) (“PENN” or the “Company”) today completed its previously announced acquisition of Barstool Sports, Inc. (“Barstool Sports” or “Barstool”) after previously acquiring a 36% stake of Barstool Sports in February 2020. PENN has acquired the remaining interest in Barstool Sports for approximately $388 million.
…“We are extremely pleased to welcome Barstool Sports fully into the PENN Entertainment family,” said PENN Entertainment CEO and President, Jay Snowden. “Barstool is a proven, powerful media brand with an authentic voice and vast, loyal audience that provides us with a strong top of funnel for new customer acquisition and organic cross-selling opportunities across our growing interactive division. Barstool, combined with theScore’s reach and highly engaged user base, creates a massive digital footprint and ecosystem that will serve to propel Barstool Sportsbook and our uniquely integrated media and gaming business. Further, the Barstool Sportsbook will greatly benefit from the upcoming migration to our proprietary technology stack, a move that will significantly enhance the overall product offering and deliver meaningful upside.”
“Barstool Sports is bigger than ever and has become more than I ever dreamed of,” said Dave Portnoy, Founder of Barstool Sports. “I’m very thankful to the Barstool team and Stoolies who have been along for the ride. I’m looking forward to this next chapter with PENN.”
“This is a huge moment for Barstool Sports that was made possible by a lot of people and a lot of grit,” said Erika Ayers, CEO of Barstool Sports. “Our focus has always been to create relevant and entertaining content for our fans and to deliver strong results for our partners. It’s exciting to have that vision recognized and to be able to put it to work inside of PENN. We have the best fan base on the planet, and we look forward to doing even more for them with PENN’s support.”
This is just the latest development for Penn and Barstool. That 2020 minority stake deal came after lots of rumors of Barstool (which was then majority-owned by The Chernin Group) selling (and possibly selling full control) to either Penn or others, and it was an interesting way to resolve that. It gave Penn significant equity in Barstool, and a path to more at a particular price, but kept a market value provision there for control or full ownership. It gave Barstool significant funding at the cost of equity, but kept incentives for them to keep growing ahead of 2023, and those have paid off; the 2020 deal valued the full company at $453 million, while this deal values it at $606 million. That’s impressive considering the many challenges for media companies around the COVID-19 pandemic and beyond. (And Barstool has also changed what they’re doing a fair bit since 2020, diving much more heavily into gambling and event broadcasting.)
This deal comes in Barstool’s 20th year of existence, and it also comes after a lot of ups and downs for the company. There’s always been significant criticism of Barstool for content and for fans’ harassment of critics, and that’s led to some entities choosing not to work with them. But something particularly notable since that 2020 Penn deal is a pair of Insider reports by Julia Black (with the second co-authored by Melkorka Licea) in late 2021 and early 2022 relaying numerous allegations of sexual misconduct against Portnoy.
In February 2022, Portnoy sued for defamation over those reports. But that case was dismissed in district court in Massachusetts in November, with the judge ruling the lawsuit didn’t prove the actual malice standard required for defamation of a public figure. Portnoy appealed, but dropped that appeal this month. Meanwhile, gambling regulators in both Nevada and Indiana looked into those allegations in early 2022; Barstool Sportsbook opened in Indiana in 2021 and remains open there, but is not yet open in Nevada. (That’s not necessarily entirely over that, though; that state requires bettors to first sign up at a physical location before placing online bets, and that’s been cited as a key reason Barstool hasn’t hit that market yet.)
Beyond those particular issues around Portnoy, some gambling-specific ones have also arisen. In January, the company launched Barstool Sportsbook in Ohio, part of the first wave of sportsbooks to go live there. But they promoted their sportsbook and pre-registration in a campus football show at the University of Toledo last November, violating an Ohio code prohibiting specific sports gaming advertising on college campuses. That led to a $250,000 fine.
Also last November, The New York Times ran an in-depth article on Penn, Barstool, and Portnoy by Pulitzer-winner Emily Steel. That article, titled “Desperate for Growth, Aging Casino Company Embraced ‘Degenerate Gambler’,” was described by Portnoy as “a hit piece.” But the Times stood by its reporting, and both Massachusetts and Nevada (in the Times article) regulators raised concerns about Barstool and Penn as a result. The Massachusetts regulators wound up approving Barstool’s application, though; they now have a physical location there, and are set to launch their app in March when the online market opens.
Despite the various controversies since taking that 2020 minority stake, Penn clearly hasn’t been scared off from Barstool. When they bought theScore (for approximately $2 billion U.S. in a cash-and-stock deal) in August 2021, they described it as “a powerful complement to the reach of Barstool,” and they closed that company’s theScore Bet app in the U.S. (it remains active in Canada, theScore’s home country) last June to focus on Barstool Sportsbook. And now, rather than just escalate their Barstool stake to 50 percent, or even to control, they’ve bought the company entirely. So the futures of Penn and Barstool are more closely linked than ever. We’ll see how that plays out.