By In February 2020, Penn Entertainment Inc., a prominent casino operator and online betting company, acquired a 36% stake in Barstool Sports for $161 million. Subsequently, Penn purchased the remaining stake this year for $388 million. However, Penn recently disclosed that it has sold the popular sports and pop-culture site back to its founder, Dave Portnoy, for the nominal fee of $1.
The decision to sell Barstool Sports back to Portnoy was motivated by Penn’s strategic shift away from the media company and its online sports-betting platform, Barstool Sportsbook. Instead, Penn has entered into a new partnership with Walt Disney Co.’s ESPN to launch an innovative online betting platform later this year. As part of the collaboration, Barstool Sportsbook, originally introduced in 2020, will be rebranded as ESPN Bet.
Penn detailed in a regulatory filing that it entered into a stock purchase agreement with Portnoy, emphasizing that the company sold all outstanding shares of Barstool Sports to Portnoy. In exchange for the sale, Penn received a nominal cash consideration of $1 and certain non-compete and other restrictive covenants from Portnoy.
Furthermore, Penn reserves the right to receive 50% of the gross proceeds from any future sale or monetization event involving Barstool Sports.
As a result of the deal, Penn foresees a “pre-tax non-cash loss” ranging from $800 million to $850 million, which will be reflected in its third-quarter financials.
Upon learning about the sales price, Portnoy responded to a post on social media with a gif captioned “1 Dollar Bob.”
The agreement between Penn and ESPN grants Penn exclusive rights to the ESPN Bet trademark in the U.S. for 10 years, with a potential 10-year extension. Penn will pay ESPN $1.5 billion in cash over the initial 10-year term and will provide ESPN with approximately $500 million worth of warrants to purchase around 31.8 million Penn shares.
Both Penn and Portnoy have expressed mutual respect following the transaction. Barstool Sports reported sales of $80.9 million and a net loss of $16.1 million for the first half of 2023.
After hours on Wednesday, Penn’s stock experienced a 1.1% drop.
Comments