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It appears that Dave Portnoy’s bank will get a little bit bigger. On Wednesday, Penn Entertainment ($PENN) officially exercised its option to acquire complete control of Barstool Sports. The US online gambling company will now use Barstool Sportsbook as its online platform for the foreseeable future.
The complete acquisition is expected to close in February 2023, after which Barstool will be a wholly-owned subsidiary of Penn.
As of writing, shares of $PENN were trading at $34.18 per share.
Penn Entertainment and Barstool Sports are a perfect match
In 2020, PENN Entertainment, formerly Penn National Gaming, uprooted the sports betting landscape by acquiring 36% of Barstool Sports for $163 million.
Within the deal, PENN included an option to increase its stake to 50% for an additional $62 million and ultimately acquire Barstool spending a grand total of $550 million once the deal is complete.
The announcement was made via PENN’s 8-K filing with the Securities and Exchange Commission on Wednesday.
In its quarterly report filed with the SEC, Penn announced a decision to purchase $62 million of Barstool Sports common stock, raising its ownership to 50%.
“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%.”
Leveraging the Barstool brand
One of the key benefits of the Barstool/PENN partnership is marketing. Unlike other operators such as DraftKings or FanDuel, Penn spends little to no money on marketing. Portnoy and his team do most of the leg work, including Chicago favorites Dave Williams (White Sox Dave) and Michael Sterk (Barstool Carl).
Back in May, during the company’s Q1 earning call, Penn CEO Jay Snowden praised Barstool as an asset to the Penn marketing strategy.
“Disciplined organic marketing, omnichannel cross-sell, great products and owning our media strategy with our friends at Barstool Sports and theScore have led to growth in our net gaming revenue market share results in the first quarter. We believe our differentiated approach will benefit us going forward.”
However, a downside to the partnership continues to be controversial predicaments surrounding Portnoy. In November, the Barstool founder was accused of sexual misconduct in an article published by Business Insider.
Regardless, Snowden continues to defend the Barstool Sports founder.
Top five market share for Barstool Sportsbook
Barstool sits as a top five sportsbook in a few markets, including Illinois and Pennsylvania. Recently, the company cleared $1 billion in all-time handle in Pennsylvania. Over in Illinois, the company is nearing $500 million in revenue since launching in March 2021.
The Barstool Sportsbook is available in 12 states (sports betting) and four states for iGaming, which includes Barstool Online Casino games like slots and table games.
Those states are:
- Pennsylvania (sports betting & online casinos)
- Michigan (sports betting & online casinos)
- Illinois
- Colorado
- Virginia
- New Jersey (sports betting & online casinos)
- Tennessee
- Arizona
- West Virginia (sports betting & online casinos)
- Iowa
- Indiana
- Louisiana
In August, Snowden hinted that Penn could be nearing profitability by the end of the year, a common thread echoed by Wall Street analysts.
“We feel very good about being profitable in the fourth quarter and not just in online casino. It’s not going to be a real significant profit, but being profitable in the fourth quarter when the rest of the market isn’t, is a big accomplishment.”
By comparison, Rush Street Gaming, Caesars Entertainment, DraftKings and more have all said their digital business will not reach profitability until 2023.
