Potential Future Exploration of Barstool Sports Sale by Penn Entertainment
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After merely two weeks since Penn Entertainment (NASDAQ: PENN) finalized the acquisition of Barstool Sports, whispers about the casino enterprise potentially offloading David Portnoy's media platform surfaced, should the financial benefits be enticing.
Not too long ago, this regional casino titan scooped up the 64% of the sports media property it didn’t own earlier for $364 million. This was about three years post the initial investment of $163 million in cash and stocks to acquire a 36% stake in Portnoy's enterprise. In total, the acquisition price amounts to $527 million, with analysts estimating that this is a significant discount compared to Barstool's fair market value.
Lloyd Danzig, managing partner of Sharp Alpha Advisors, said in an interview with John Wall Street that they'll have shelled out roughly $525 million in total compensation for an asset that seems to be valued between $800 million - $1 billion by most experts.
Ever since Penn nabbed its opening stake in Barstool Sports in 2020, they've embarked on applying the brand to their online and retail sportsbooks, aiming to capitalize on "stoolies" fondness for Portnoy and other Barstool personalities to boost sports wagering success.
Barstool Sportsbook reported a decent profit in Q4, but its market share stands at a negligible 2.65%, as per John Wall Street, lagging far behind competitors such as FanDuel, DraftKings, and BetMGM, et al. This trend was evident in January in Ohio — the inaugural month of online sports betting in the state.
In the Ohio market, where Penn operates regional casinos, Barstool managed to capture merely 2.6% of revenue share. This pales in comparison to the combined 77% of FanDuel and DraftKings, neither of which possess a land-based presence in the state.
Barstool Sports Evaluation Disparity
Although Penn is unlikely to part ways with Barstool Sports in the near-term or even the mid-term, it's possible that the gaming company might consider such a move, should the value of Barstool media substantially overshadow that of the sportsbook operation.
Basically, Penn isn't in the media business, and if the media sector's worth skyrockets while the sportsbook's market share remains stagnant, the casino operator could opt to dispose of the sports media property and license its brand name.
Chris Grove, cofounding partner of Acies Investments, informed John Wall Street that if a substantial gap emerges between the worth of Barstool as a media brand and Barstool as a sportsbook brand, Penn might find itself in a situation where offloading Barstool and licensing back the brand for sports betting would provide the maximum value to shareholders.
Grove added that such a transaction is not imminent. However, Penn CEO Jay Snowden could be inclined to at least weigh an offer, particularly if it's around or more than $1 billion.
Penn Barstool Sale: Not So Hasty
For a company worth $4.96 billion, selling a high-value asset for $1 billion or more could be alluring, especially when it comes to debt reduction.
However, identifying potential buyers could be a challenge, as Barstool and Penn are perceived as connected at the hip. This scenario could intensify if the casino operator seeks to license the brand.
In this case, gaming companies might be ruled out from future bidding processes. However, other media entities could consider inspecting Portnoy's sports and pop culture enterprise.
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