Penn spent some $550 million on Barstool Sports. Dave Portnoy got it back for $1.

By Bill Peters

Penn says it expects to book a 'pre-tax non-cash loss' of between $800 million and $850 million resulting from the deal

In February 2020, casino operator and online betting company Penn Entertainment Inc. took a 36% stake in Barstool Sports for $161 million. This year, Penn bought the rest for $388 million. But on Wednesday, Penn said it sold the popular sports and pop-culture site back to founder Dave Portnoy for far less -- $1, to be exact.

The sale price, disclosed in a regulatory filing, came as Penn pivots away from Barstool and the media company's online sports-betting platform, Barstool Sportsbook, for a deal with Walt Disney Co.'s (DIS) ESPN to launch a new online betting platform this fall. Under that deal, Barstool Sportsbook, first launched in 2020, will be rebranded as ESPN Bet.

Penn (PENN) said in the filing that as part of the effort, the company entered into a stock purchase agreement with Portnoy on Tuesday. In connection, it said, "Penn sold 100% of the outstanding shares of Barstool to David Portnoy in exchange for a nominal cash consideration ($1.00 dollar) and certain non-compete and other restrictive covenants."

Penn also said that it has the right to take half of the gross proceeds received by Portnoy in "any subsequent sale or other monetization event of Barstool."

Penn said it expected to book a "pre-tax non-cash loss" of between $800 million and $850 million resulting from the deal. The company said it expects to take that hit in the third quarter.

In response to a post about the sales price on X, the site formerly known as Twitter, Portnoy posted a gif with the caption "1 Dollar Bob."

The deal announced Tuesday gives Penn the exclusive rights to the ESPN Bet trademark in the U.S. for 10 years, with a possible 10-year extension on the table. Penn will pay $1.5 billion in cash to ESPN over that 10-year year term and grant ESPN around $500 million of warrants to buy around 31.8 million Penn shares.

Both Penn and Portnoy expressed respect for one another following the deal. Barstool's sales and net loss for the six months ended June 30, 2023 were $80.9 million and $16.1 million, respectively.

Shares of Penn were down 1.1% after hours on Wednesday.

-Bill Peters

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08-10-23 0748ET

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