Dave Portnoy, buys back Barstool for $1 after selling for $551 Million....
Media magnate Dave Portnoy sold Barstool in 2020 for $551 Million, last week he bought it back for $1, how?
Happy new week,
In a surprising turn of events, Dave Portnoy, the charismatic founder of Barstool Sports, has reclaimed his media empire for $1. Here’s the backstory.
In 2003 Dave Portnoy launched Barstool Sports, having realised a gap in the market related to sports betting. He began by producing a local Boston Newspaper that featured sports bets. His childhood friends would help him write articles for the newspaper under pretend accounts, making them seem like they had multiple writers. They would spend over 10 hours a day writing content for the local paper.
By the year 2007, the local paper had experienced immense growth and therefore Dave Portnoy decided to move into the online space. This was a wise decision as they even gained higher traffic from all over the world. Up to date, Barstool receives up to 1,000,000 visitors a month on their website with their best performing year being 2016 when Forbes reported that the company had an average of 8 million unique visitors in a month.
Penn Entertainment, a Pennsylvania-based sports content platform and casino operator, initially bought a 36% stake in Barstool Sports in 2020 for $163 million and acquired the rest in February 2023 for $388 million—a total of $551 million. Penn Entertainment bought Barstool as they wanted to use it to launch their new sports betting platform. Under Penn’s management, Barstool struggled to get viewers as it wasn’t the authentic barstool their audience loved. They tried to make Barstool more mainstream and censor it but Barstool is known for its college boy-style attitude, alienating their core fanbase.
Last week Penn Entertainment announced a groundbreaking deal with ESPN. They will be partnering with ESPN for their new sports betting platform. They will rebrand its Barstool Sportsbook as ESPN Bet, which will launch in the 16 states where Penn is licensed later this year. Penn has agreed to pay ESPN $1.5 billion in cash over the initial 10-year agreement for ESPN Bet, according to a statement.
As part of this new partnership, they decided to sell Barstool back to Portnoy for $1. Huge win for Barstool Sports not so much for Penn Entertainment. Barstool was yet to make money for Penn, posting a $16 million loss for the first six months of 2023. Penn says it will write off between $800 million to $850 million on Barstool, greater than the $551 million total it paid for Barstool. Dave Portnoy now has 100% ownership of Barstool again and he gets to keep the money he made from the original sale. He had to sell 1.25 million shares of Penn he acquired six months ago as part of the company’s purchase. With Penn shares trading around $24, that’s another $30 million payday for Portnoy. Not a bad deal to me!
However, there are a few conditions that came with that sale and Barstool has a few limitations on how it can make money now. For one, Barstool had to sign a non-compete with Penn Entertainment not to work with any of their competitors. Barstools can’t launch a sports book or even advertise other sportsbooks. This is a massive hit to the company as a lot of its revenue comes from advertising sports books. If they were to sell the company again, they must give Penn 50% of the money made.
I believe Barstool is able to find alternative ways to generate revenue outside betting. They can now go back to creating content for their core fans in their authentic way without having to think of what they say, what they do. The deal does limit Dave but he’s a savvy entrepreneur who now has 100% of his creation. I’m excited to see how he plays the cards he’s been dealt.