Barstool founder Dave Portnoy may have just secured his place in the media business Hall of Fame.
Dave had already earned a $100 million net worth selling Barstool for around $400 million over several transactions, the last of which closed exactly one year ago. And as if that wasn't impressive enough, yesterday he pulled-off a Jujutsu move that has left media business owners and observers, including myself, absolutely drooling.
Yesterday Dave re-acquired 100% of Barstool for… $1.00. That's not a typo. A buck.
What? Why? How?
The History of Barstool's Sales
Dave Portnoy founded Barstool Sports in 2003 as a print publication for Boston sports. In 2007 Barstool launched a website, expanding the content beyond the Red Sox, Bruins and Patriots to all teams and sports. It added a merchandising business, podcasts, video series, social media… and more.
With its focus on humor and no-holds-barred opinions and commentary, Barstool struck a nerve, mainly with young male sports fans. It found a large audience that up to that point was being totally ignored by the reigning stodgy sports giants like ESPN and Sports Illustrated. Over the next few years, especially with the advent of Instagram and other short-form social media where the company's scrappy talents really shined, Barstool's audience grew and grew and grew.
In January 2016, The Chernin Group acquired a minority stake in Barstool for $15 million. Two years later, Chernin kicked-in another $25 million to up its stake to 60%. With both transactions, Dave remained 100% in charge of Barstool's content. And with no co-founders, he kept 100% of the $40 million (after taxes).
Barstool kept growing. And growing.
In January 2020 a company called Penn Gaming paid $163 million to acquire 36% of Barstool. At this transaction, Chernin's stake was reduced to 36%, while Portnoy owned 28%.
Through some agreements that were baked into the January 2020 transaction, Penn soon exercised the right to increase its stake to 50%. And then in August 2022, an SEC filing showed that Penn exercised its right to buy 100% of Barstool.
Between all transactions, Penn Gaming paid $351 million, all-in, to acquire Barstool.
Over the course of all of the transactions dating back to Chernin, plus Penn Gaming equity he received, Dave Portnoy earned a net worth of at least $100 million.
Re-Acquired For A Buck
Yesterday, Penn Gaming announced it had entered into a $2 billion long-term exclusive betting partnership with ESPN. The partnership will be called "ESPN Bet" and, crucially for this article, the terms of the deal do not allow Penn Gaming to have other betting partnerships. That's a problem because Penn had previously renamed its betting brand "Barstool Sportsbook."
There are other issues.
ESPN is owned by Disney. As you know, Disney maintains a squeaky clean image that is polar opposite of Barstool and Portnoy.
And there's also some bad blood here. Back in 2017, Barstool had a show on ESPN called "Barstool Van Talk." ESPN aired it ONCE, on a Tuesday night at 1am on ESPN2. The abrupt canceling did not please Portnoy, who then very publicly shamed ESPN executives and on-air talent.
- It wanted to secure a partnership with ESPN.
- It knew Disney probably wanted nothing to do with Barstool and Portnoy. And vice versa.
- It couldn't continue operating Barstool Sportsbook.
So what was Penn Gaming to do?
An obvious idea would be to sell Barstool to the highest bidder. But who would buy Barstool? A brand that is still entirely driven by the sheer force of personality of Dave Portnoy. Can you imagine Portnoy happily working under some new owner? With a net worth of $100 million, a huge social platform and a history of not exactly being a go-along-to-get-along kind of guy… this was not a real option.
In my opinion, Portnoy and Penn knew Barstool was only valuable to one buyer: Dave Portnoy. And that's what happened.
According to Penn's just-released quarterly report:
"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."
Why not try to get more than $1? Several reasons.
First, they realized they only had one viable buyer (Dave Portnoy) and having one buyer does not leave the seller with a lot of room to make demands.
Second, selling for $1 allows Penn to maximize a future write-off. In its just-released quarterly report, Penn Gaming revealed that over its time as owner of Barstool, it spent $551 million on the brand. Presumably, that's $351 million to buy the company and another $200 million in various costs and investments in the last three years. Penn will be able to use that $551 million to counter an equivalent amount of profit, perhaps over several years, giving them $551 million in tax-free earnings.
Finally, Portnoy did agree to some key incentives.
In addition to agreeing to never disparage Penn Gaming or ESPN, Barstool can't license the Barstool name to another sports book AND – most importantly – Dave agreed to give Penn Gaming 50% of any money he earns from a future sale of Barstool, seemingly forever.
Dave Portnoy started a magazine in 2003. He turned it into a website. He earned a $100 million net worth selling the company for $400 million over several transactions. And then he bought his baby back for a single, solitary dollar.
Please dear God let me find that same deal for CelebrityNetWorth some day.