Posted on: February 28, 2023, 02:42h.
Final up to date on: February 28, 2023, 02:42h.
It hasn’t even been two weeks since Penn Leisure (NASDAQ: PENN) accomplished its acquisition of Barstool Sports activities, however rumors surfaced the on line casino operator might finally half with David Portnoy’s media entity if the economics of such a deal are compelling.
Earlier this month, the regional on line casino big bought the 64% of the sports activities media property it didn’t beforehand personal for $364 million, about three years after it paid $163 million in money and inventory to buy a 36% curiosity in Portnoy’s agency. That’s a complete buy worth of $527 million, which is believed to be a considerable low cost to Barstool’s honest market worth.
They’ll have paid roughly $525 million in whole consideration for an asset that the majority analysts appear to assume is value anyplace from $800 million to $1 billion,” Lloyd Danzig, managing associate, Sharp Alpha Advisors, mentioned in an interview with John Wall Avenue.
Since buying its preliminary stake in Barstool Sports activities in 2020, Penn has utilized that model to its on-line and retail sportsbooks, trying to leverage “stoolies” affinity for Portnoy and different Barstool personalities into sports activities wagering success.
Whereas Barstool Sportsbook notched a modest fourth-quarter revenue, its total market share is a scant 2.65%, in line with John Wall Avenue, placing the operator nicely behind rivals corresponding to FanDuel, DraftKings and BetMGM, amongst others. That pattern was on show in January in Ohio — the primary full month of on-line sports activities betting in that state. Barstool captured simply 2.6% of income share in a state by which Penn operates regional casinos. That compares to a mixed 77% for FanDuel and DraftKings, neither of which have land-based footprints within the state.
Barstool Valuation Hole
Whereas it’s unlikely that Penn will half methods with Barstool Sports activities over the near- and even medium-term, it’s not out of the realm of risk that the gaming firm considers such a transfer if the worth of Barstool media continues far outpacing that of the sportsbook operation.
Mentioned one other approach, Penn isn’t within the media enterprise and if that portion of Barstool positive factors worth whereas its sportsbook market share languishes, the on line casino operator might divest the sports activities media property and license its title.
“If a sufficiently big hole opens up between the worth of Barstool the media model and Barstool the betting model, PENN might discover themselves in a spot the place promoting Barstool and licensing again the model for betting creates the best worth for shareholders,” Chris Grove, co-founding associate, Acies Investments, informed John Wall Avenue.
Grove added such a transaction isn’t within the near-term offing, however Penn CEO Jay Snowden might be compelled to no less than study a proposal, notably if it’s round or above $1 billion.
Not So Quick on Penn Barstool Sale
For an organization with a market worth of $4.96 billion, promoting a single asset for $1 billion or extra might be enticing, notably relating to lowering debt.
However, it’s not readily obvious whom would come calling for Barstool Sports activities. A dearth of consumers is feasible as a result of Barstool and Penn are seen as joined on the hip and the state of affairs might be additional amplified if the on line casino operator needs to license the model.
Which may get rid of gaming corporations from a future bidding course of, however different media entities might kick the tires on Portnoy’s sports activities and popular culture property.