On January 29, 2020 – Penn National Gaming Inc bought a 36% stake into Barstool Sports Inc. The transaction amounted to about $163 million in cash and convertible preferred stock.
Penn National Gaming:
North America’s largest gaming corporation located in Wyomissing, PA. Penn National Gaming (PENN: Nasdaq). PENN is a gaming, horse racing facility, and provides operations such as slot machines, table games, and other entertainment for their customers. Looking at the numbers, PENN has around 50,500 gaming machines, 1,300 table games and 8,800 hotel rooms. Not to mention, PENN operates in 41 facilities in 19 jurisdictions. Overall, Penn National covers a significant amount of the North American gaming market.
On the other side of the coin, Barstool Sports is a major media brand. Barstool Sports is a one stop-shop for news on pop-culture, sports blogs and opinions and different podcasts which cater to a wide variety of listeners. These listeners begin mostly millenniums. Barstool Sports has seen incredible growth and brand recognition over the past decade, most of which is a factor of the management behind the brand. David Portnoy, a media character is the founder of the internet platform of Barstool Sports. David created the brand and continues to review and have a huge say in which content is portrayed and when. Barstool recently hired Erika Nardini last year as the company CEO.
With past experience with companies such as Microsoft, Yahoo, and AOL, Erika was a perfect fit to manage the business side and operations of Barstool Sports. Looking back to previous years, 2016 marked the first significant investment of Barstool Sports. In 2016, Barstool Sports secured an investment with the Chernin Group who facilitates media and technology. This investment was to ensure Barstool Sports had someone of great class to monitor and promote a unique media prospective. Overall, this major investment in 2016 had resulted in excellent returns for both Chernin Group and Barstool Sports. In fact, the Chernin Group put another $15 million into Barstool two years after their initial investment. Hence, why Barstool and PENN have decided to collaborate.
As of Friday February 28, 2020 the stock price of PENN is $29.57 USD at close. PENN has reported a 15.69% growth YTD. According to CNN Business, 13 analyst have forecasted a median price target for PENN to reach $31.89 as of Friday February 28, 2020. This indicates that the high price estimate out of these 13 analysts is $51.00 USD, and a low price estimate of $21.00 USD. In terms of recommendations, 14 analysts have a buy recommendation, leaving none of the analysts to support a hold or sell recommendations. Even in the major market sell off seen recently, these recommendations have been unchanged since the beginning of February and this acquisition
Profitability of the Acquisition:
Overall, PENN is paying $135 million in cash and $28 million in equity to acquire its 36% stake in Barstool Sports. If PENN had the appropriate funds and the merger was successful they could continue to buy an additional 50% stake ($62 million) to become outright owners of Barstool Sports. In the agreement, PENN is Barstool’s official gaming partner for the next 40 years. Morgan Stanley has estimated that if 36 states legalize sports betting by 2025, the US sports gambling market could be worth around $7 billion. This would be a considerable increase in the overall market. However, it is hard to say how much of that $7 billion would be attributed to PENN’s success.
Overall, I believe this acquisition between Penn National Gaming and Barstool Sports is a win-win for both organizations. On one hand you have the excellent foundation of property and infrastructure of Penn national. Their enormous position in North American Gambling industry fuels the fire for Barstool’s media presence. Barstool Sports provides Penn National with the millions of sports fan’s its brand has inherited and a new opportunity to fully capture the sports-betting market. For instance their one podcast (Pardon my Take) attracts up to 2 million downloads per episode. Barstool Sports will plan to continue to attract an audience through podcasts and blogs, some of which already highlight gambling picks and opinions.
Furthermore, in 2018, the Supreme Court legalized sports gambling nationwide. This included individual states developing their own terms and conditions. With sports gambling on the rise, the timing of this acquisition can create a brand and gambling organization that could be unstoppable. However, since a lot of the sports gambling prior to 2018 was in the black market or considered illegal. It is hard to determine the exact size of the industry pre legalization. Barstool Sports fans can now buy into the business strategy through Penn National. PENN is listed on the NASDAQ stock exchange, currently being traded for $28 USD per share.
1] PENN. (n.d.). Retrieved February 25, 2020, from
2] Penn National Gaming. (n.d.). Retrieved February 25, 2020, from https://www.pngaming.com/
3] Reimer, A. (2020, January 29). Barstool Sports’ $450 Million Deal With Penn National Gaming Is Ultimate Win-Win. Retrieved February 25, 2020, from https://www.forbes.com/sites/alexreimer/2020/01/29/barstool-sports-sale-to-penn-national-gaming-is-ultimate-win-win/#70ef197a713e
4] Shriber, T. (2020, January 29). Penn National Barstool Buy Not All It’s Cracked up to be, Says
Analyst. Retrieved February 22, 2020, from https://www.casino.org/news/penn-national-barstool-buy-not-all-its-cracked-up-to-be-says-analyst/
James Cromack is a 2019 Stewart Lockie Gibson Scholarship holder and is currently pursuing a BCOMM in Finance with a minor in Economics. Alongside academics, James is a varsity member of the Dalhousie Cross Country / Track & Field teams and the Dalhousie Investment Society (DALIS). James looks to share and expand his knowledge of the financial markets and the world economy.