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Unbothered by David Portnoy, Penn Entertainment Remains Unfazed According to Financial Analyst

JPMorgan analyst labels Portnoy as posing no threat to Penn Entertainment or its investors.

Barstool Sports founder David Portnoy in one of his famed pizza reviews. An analyst says heโ€™s not a...
Barstool Sports founder David Portnoy in one of his famed pizza reviews. An analyst says heโ€™s not a problem for Penn Entertainment.

Unbothered by David Portnoy, Penn Entertainment Remains Unfazed According to Financial Analyst

David Portnoy, the man behind Barstool Sports, is no stranger to stirring up drama. Some might say he even enjoys it, yet this trait doesn't seem to be a concern for Penn Entertainment (NASDAQ: PENN).

In early 2018, Penn acquired a 36% stake in Portnoy's company for $163 million in cash and stocks. Fast forward three years, and Penn completed its acquisition of the remaining 64% of Barstool Sports and Entertainment, worth $388 million.

Portnoy's association with Penn and other prominent Barstool personalities has caused a bit of a headache for regulators in certain states, like Massachusetts and New York, where Penn sought sports betting licenses. The issue? The employment status of Portnoy and others who offer sports betting advice and reportedly place bets through Penn-owned Barstool Sportsbook.

According to J.P. Morgan analyst Joseph Greff, Portnoy and fellow personality Dan โ€œBig Catโ€ Katz's employment contracts are managed through a loan-out company, freeing them from the requirement to hold a gaming license.

Greff made these remarks after a discussion with Felicia Hendrix, Penn's CFO, at the J.P. Morgan Gaming, Lodging, Restaurant & Leisure Management Access Forum in Las Vegas.

Portnoy's Controversial Past

Portnoy has a reputation for annoying people across the political spectrum and various walks of life. An example? His interview with then-President Donald Trump at the White House in July 2020, coupled with frequent appearances on Fox News, raised speculation about his political leanings.

In 2021 alone, Portnoy praised Elon Musk's acquisition of Twitter, criticized the Supreme Court's decision to overturn Roe v. Wade, and pondered the idea of relocating from New York to Florida, a move that would save him from high taxes.

There's also the matter of Portnoy's personal life, which became a subject of debate following a series of articles published by Insider, detailing the raunchy aspects of some of his encounters. Portnoy later filed a lawsuit against Insider, avoiding any criminal charges.

During their conversation, Greff and Hendrix didn't delve into Portnoy's controversial past. Instead, Hendrix shared that Portnoy, Katz, and Barstool CEO Erica Nardini have employment contracts with Penn, and they retain investments in both Barstool and the casino operator. Portnoy's contract will expire in 2025, while Katz's and Nardini's contracts will end in 2026.

Penn's Gain from Barstool Ties

While speculation about Barstool's future under Penn's wing persists, the immediate challenge for Penn is demonstrating the benefits of owning Portnoy's company to investors. It appears this is happening in the areas of advertising and commerce.

According to Greff, Barstool is profiting from shows, social media, and personalities, while the loyal following is boosting commerce.

Greff predicts that Barstool Sportsbook will increase marketing spending ahead of the 2023 football season to capture more market share. However, he suggests that this increased spending won't involve traditional TV advertising, but rather digital and social media channels instead.

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