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Dave Portnoy Pays Just $1 to Buy Back Barstool Sports
By Jeff Osienya Aug 11, 2023 Industryollowing an unexpected losing streak in the ultra-competitive sports betting market, PENN Entertainment has disclosed that it handed the Barstool Sports brand back to its original owner, Dave Portnoy. The transaction is said to have cost a mere greenback.Swooping back to his first love, Barstool Sports founder Dave Portnoy purchased the site back for just $1 from PENN Entertainment. This information was listed in PENN’s recent quarterly filing with the Securities and Exchange Commission. It has been a nightmarish situation for PENN Entertainment, which paid to acquire 100% ownership of Barstool in a $500 million deal just a few months ago.
PENN will also take a painful $850 million hit on the pro-focused sports entertainment brand that it held total ownership of just six months ago. PENN Entertainment CEO Jay Snowdown, in a question-and-answer session with Wall Street Analysts on Wednesday morning, remarked:
Quote“It just became obvious there’s probably only one long-term owner of Barstool Sports, and that’s Dave Portnoy and Barstool Sports.”
Diving Into The Details Of the Deal
Besides handing over 100% of its ownership to Dave Portnoy in exchange for a nominal value, PENN Entertainment received non-compete assurances and other certain ‘restrictive covenants.’ Portnoy also agreed to give 50% of any future sale proceeds of Barstool Sports to PENN Entertainment. Also, PENN Entertainment agreed to indemnify Barstool, its subsidiaries, and Dave Portnoy for certain tax matters.
Needless to say, the outspoken Barstool Sports founder was ecstatic when he spoke about the new developments, having gotten back his brainchild. He said:
Quote“For the first time in a decade, I own 100% of Barstool sports. Not since the Chernin deal have I been in total control of everything.”
With the site back to its founder, Portnoy says he will steer it back to its roots. He added,
Quote“It’s back to the Pirate Ship… for the first time in forever, we don’t have to watch what we say, what we do. And by the way, I am NEVER going to sell Barstool Sports. I’ll hold it till I die.”
A Founder Steeped In Controversy
Portnoy recently admitted that he and PENN Entertainment underestimated how hard it really was for Barstool Sports to operate in a regulated framework. This admission is an acceptance of the controversial profile that he has arched for himself in the public light. Some have described Mr. Portnoy as a misogynistic chap who rode on the wave of misogyny to build his extensive business empire.
He was once quoted saying things that would be associated with a rape apologist and has also repeatedly admitted to using the N-word. The profile just gets worse from there. He once outed women who accused him of sexual misconduct and issued threats to some of his employees who were unionizing. It’s a tainted public image that has stuck with him for long.
It is, however, estimated that the dealings with PENN Entertainment substantially made Portnoy rich. While we are yet to know how much Portnoy made on the initial deal in 2019 when PENN Entertainment acquired partial ownership of Barstool, it is believed that Portnoy owned 49% of it at that time. If this information is accurate, it is estimated that Portnoy made at least $150 million in cash and received at least 1 million or more shares in PENN when the two parties closed the deal for full ownership in February.
The Straw That Broke the Camel’s Back
As you may already know, it’s been far from smooth sailing for PENN Entertainment ever since it took over ownership of Barstool Entertainment. Suffice it to say tensions have been brewing between the Barstool Sports team and the team from PENN Entertainment.
The tension was evidenced In May when PENN overrode Barstool executives after Barstool sacked Ben Mintz, a Poker player who had uttered a slur while he read lyrics to a song on a live stream. This would coincide with PENN’s first quarter earnings report, which, as you can guess, was not quite rosy. The financials missed Wall Street estimates, causing shockwaves across the industry, with PENN’s stock falling to the lowest it’s ever been since May 2020.
Besides gaining access to a younger fanbase, PENN felt that Portnoy’s stream of legal issues was a liability that affected Barstool’s name for long and needed to be dealt with. Potential investors kept off Barstool’s performance as they were worried about Portnoy’s risk, while regulators were continuously reluctant to issue gambling licenses to Barstool. Financially, the move didn’t make sense, with Barstool registering a $13 million loss during the first half of 2023.
PENN Strikes A Deal With ESPN
While the recent happenings have revealed a failure on PENN’s part with Barstool, the entertainment company recently announced a notable win. PENN disclosed that it inked an agreement with ESPN to rebrand all its Barstool Sportsbooks as ESPN BET, and hand the brand back to its founder, Portnoy. The rebrand will be effected in all the 16 legalized betting states in which PENN Entertainment is licensed, including the mobile apps, websites, and mobile websites.
ESPN BET will now become the exclusive ESPN sportsbook. Additionally, PENN Ent will be receiving odds attribution and promotional services, including integration of digital products, traditional media, content, and ESPN talent access. As expected, the market reacted pretty positively to news of the Barstool Sports and ESPN arrangements, with PENN shares soaring by 14% immediately after the information was official.
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