Rumblings about a possible purchase of Penn Entertainment by Boyd Gaming could hinge on whether Disney, owner of ESPN, would allow the new company to continue its 10-year agreement for the ESPN BET deal currently with Penn.
Penn Stock Staggering
Penn Entertainment’s stock price has plunged under the watch of CEO Jay Snowden who stepped into the top job in January 2020 when the stock was over $130 per share, it is now $18.32 as of this writing. During Snowden’s tenure as CEO, he completed a deal for the purchase of the Barstool Sports media company for approximately $550 million and immediately created Barstool Sportsbook as the company’s new foray into the mobile sports betting realm.
Yet, less than six months after the sale was consummated, Snowden signed off on a 10-year, $1.5 billion deal plus $500 million in Penn stock warranties with ESPN for the right to use its name and platform to create ESPN BET. The caveat was that Penn had to divest itself entirely from Barstool as a contingency of the agreement with ESPN.
Snowden’s team immediately sold Barstool back to its previous owner to satisfy the terms of the deal with ESPN. The sale price to Barstool’s previous owner, the controversial Dave “El Presidente” Portnoy, was $1 with the stipulation it could not remain a sportsbook, only a sports media brand. Moreover, Penn would receive 50% of the sale price if Barstool Sports was sold at any time in the future. Portnoy has vowed never to sell Barstool, a brand he started over 20 years ago.
Investors Speak Out
Penn Entertainment’s investors have become disgruntled with the flagging stock and Will Wyatt, managing partner of the Donerail Group, a major investor of Penn Entertainment, had had enough and wrote a public letter to Penn’s chairman David Handler and the board of directors.
“We believe that the significant criticism from the investment community regarding PENN’s recent capital allocation is understandable, however,” Wyatt said. “After four years of effort, attention, and billions of dollars of shareholder capital invested, the company has been unable to disintermediate the online sports betting landscape, as it had forecast.”
Wyatt’s letter continued: “What may be additionally troubling for shareholders is that the operating losses that are growing meaningfully – and have become a central part of the PENN equity narrative – sit within an interactive business that currently has no operating leadership. What gives this Board any confidence in PENN’s future under this strategy?”
While the stock plummeted, Snowden has received nearly $100 million in compensation over the last four years.
Boyd Gaming Rumors
Nevada-based Boyd Gaming recently hired gaming veteran and industry dealmaker, Michael Hartmeier, to the company’s board of directors amid rumors that the company has approached Penn about buying the company. It would be a case of a smaller fish eating a larger one as Boyd Gaming has a market value of $7.8 billion while Penn’s is reported to be over $9 billion.
Should Penn be amenable to such overtures, Boyd Gaming, or any entity interested in buying it, would have to convince Disney, owner of ESPN, to continue with the 10-year deal to operate ESPN BET. The pact is not even a full year into its 10-year agreement and the results thus far have been underwhelming.
ESPN BET was slated to be a major player right from the start due to its name recognition and stature as the exclusive odds provider to ESPN’s TV and digital platforms. However, where Barstool Sportsbook claimed roughly 3% of the mobile sports betting market, its rebrand under ESPN BET has done only marginally better in key states including Pennsylvania, Massachusetts, and Illinois, with roughly 5–6% of the market.
