Penn National Moves Forward With Barstool Despite New Portnoy Allegations

Penn National Gaming held its latest earnings call yesterday, reporting that it had beat revenue forecasts. While that should have been the focus of the call, more attention is being given to Barstool Sports founder Dave Portnoy. However, Penn National CEO Jay Snowden is convinced a move to buy out the rest of the company makes sense.

Penn National Stands by Portnoy

Snowden said during the call that the company will continue to work toward owning Barstool. Penn National purchased a 36% stake in Barstool Sports in January 2020 for $163 million. The deal required an additional $62 million investment over three years in order to reach 50% ownership. Penn National was also granted the right to purchase full ownership of the Boston-based media company, which was valued at $450 million.

Penn National uses the Barstool brand to market its digital sportsbook. It launched in Pennsylvania in September 2020, and is now available in 12 other states. Portnoy and Barstool Sports associates promote the sportsbook heavily to millions of social media users. This helps to avoid the high marketing costs associated with competitors.

Portnoy’s irreverent, controversial nature was a reason for the success of Barstool. However, there have been allegations against him during his time as a Penn National partner and sportsbook marketer. Business Insider reported last November that Portnoy was accused of rough sexual treatment by women.

Convenient Timing of New Allegations

A Wednesday follow-up report contained claims from anonymous women that he had filmed their sexual activity without their consent. Snowden, in opening the earnings call, called attention to the fact that the two Business Insider articles aimed at Portnoy were published just before Penn National’s quarterly investment reports. It appears to be more of a smear campaign than an opportunity to share the facts about what may or may not have happened.

The allegations won’t stop Penn National’s progress. Its plan, when it first bought into Barstool, included the purchase of the remaining company shares. It anticipated increasing the stake to 50% within three years or earlier at Penn’s decision.

This incremental investment, which is approximately $62 million, is consistent with the implied value at the time of the initial purchase and provides a pathway to full control of Barstool Sports.

Snowden answered a question about whether the Barstool leadership team or content creators would need to have certain ownership levels to create content for Barstool’s app. He said that they are still working through the issue internally and that it is “TBD.”