Barstool Sports founder Dave Portnoy paid $1 to buy back his media brand from Penn Entertainment (PENN), according to a regulatory filing published late Wednesday.
The sale comes after Penn announced a $2 billion sports betting deal with ESPN on Tuesday. Starting in the fall, Penn's online mobile sports book, formerly called the Barstool Sportsbook, will be named ESPN Bet.
Penn initially took a 36% stake in Barstool for $163 million back in 2019. Earlier this year, the company spent another $388 million to buy the remaining interest in Barstool.
Penn said in a filing on Wednesday it expects to lose up to $850 million on the investment. The company also retains the right to earn 50% of the proceeds should Portnoy ever sell or monetize Barstool in the future.
In a video posted on X, formerly known as Twitter, after the news broke on Tuesday, Portnoy said he would hold Barstool "until I die."
"For the first time in forever we don't have to watch what we say, what we do — it's back to the pirate ship," Portnoy said.
"And by the way, I am never going to sell Barstool Sports ever. I'll hold it until I die."
Emergency Press Conference - I Bought Back Barstool Sports pic.twitter.com/dmUk0eNowx
— Dave Portnoy (@stoolpresidente) August 8, 2023
Penn initially planned to use Barstool's content arm to help promote its sportsbooks to a younger audience.
But the relationship with Barstool caused regulatory concerns when the operator applied for sportsbook licenses, with the controversy surrounding Portnoy eventually weighing on the stock.
"We did this deal about three years ago, and I think both parties were like, 'We're going to take this thing to the moon,'" Portnoy said Tuesday.
"And I think we underestimated how tough it is for myself and Barstool to operate in a regulated world where gambling operators, the New York Times, [and] Business Insider hit pieces [are] f****** with the stock price. Every time we did something it was one step forward, two steps back," Portnoy added.
"We got denied licenses because of me, you name it. So the regulated industry probably [is not] the best place for Barstool Sports and the type of content we make."
When asked during a call with analysts on Wednesday morning about the split with Barstool, Penn CEO Jay Snowden echoed Portnoy's sentiment about regulatory concerns.
"It became obvious to both parties that there's probably long-term only one natural owner of Barstool Sports and that's Dave Portnoy," Snowden said.
"Being part of a publicly held highly regulated license gaming company it became clear that we weren't a natural owner. ... It's a great day. It's great for Barstool Sports. ... It's great for Penn, great for ESPN, everyone's feeling great about the future."
Asked about ESPN's deal with Penn on a call later on Wednesday, Disney CEO Bog Iger said the company had "been in discussions with a number of entities over a fairly long period of time" regarding a sports betting deal at ESPN.
"[Penn] stepped up in a very aggressive way and made an offer to us that was better than any of the competitive offers by far," Iger added. "And we like the fact that [Penn] is going to use this as a growth engine for their business."
Josh Schafer is a reporter for Yahoo Finance.
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