🤯 Penn sells Barstool Sports for $1

Disney Steals Netflix's Playbook, and more...

August 13, 2023

TOP STORY
🤯 Penn Entertainment Sells Barstool Sports For $1, ESPN Enter Gambling World

In an unexpected turn of events, Penn Entertainment sold Barstool Sports back to its original founder, Dave Portnoy for $1 after spending ~$551 million to acquire them. Here’s a recap of the timeline:

  • February 2020: Penn took a 36% stake in Barstool Sports in February 2020 for ~$163 million.

  • February 2023: Penn acquired the remainder of the company for ~$388 million.

  • August 2023: Penn sells Barstool Sports for $1 back to Portnoy.

Barstool Sports grew exponentially under Portnoy's leadership, establishing itself as a significant sports brand, especially among young male audiences. Its acquisition by Penn was initially aimed at utilizing the Barstool name to gain a competitive edge in the sports-betting industry.

It appears the reason for the sale back to Portnoy is primarily due to regulation. In a video announcement, Portnoy mentioned that “we underestimated just how tough it is for myself and Barstool to operate in a regulated world".

Penn CEO Jay Snowden echoed this sentiment, saying “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."

The deal with Portnoy includes a pledge to provide Penn with 50% of the revenue from any future sale of Barstool Sports and includes certain non-compete and other restrictive covenants.

Amid the surprise sale of Barstool, Penn Entertainment announced a major partnership with ESPN to venture deeper into the sports gambling arena.

Penn's sportsbook will undergo a transformation, rebranding the Barstool Sportsbook as "ESPN BET" across 16 licensed states, accompanied by a comprehensive digital presence including an app and website.

This shift, bolstered by a $1.5 billion deal with ESPN spanning a decade and stock warrants offered to ESPN, significantly erases Penn's prior emphasis on the Barstool brand.

📉 Following the announcements, $PENN surged by as much as 26% but eventually declined, closing the week down 4.43%.

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EARNINGS RECAP
🤑 Disney Reports Earnings, Copying Netflix’s Playbook

Disney’s stock rose 4% after revealing its Q3 2023 earnings, despite missing analyst estimates on revenue and Disney+ subscribers. Disney reported revenue of $22.3 billion, up 4% from the previous year, while its operating income slid down by 6% to $3.6 billion.

  • Revenue: $22.33 billion (vs. 22.5 billion expected) ❌

  • Earnings: $1.03 per share (vs. $0.95 per share expected) ✅

  • Disney+ Subscribers: 146.1 million (vs. 151.1 million expected) ❌

$DIS stock is up 2.82% this week but is still flat this year, trailing behind its peers.👇

Disney+ Hotstar, the streaming arm of Disney in India, grappled with a significant subscriber loss, losing 12.5 million subscribers in the recent quarter. This decline was a result of a strategic shift to distance itself from low-margin subscribers and the loss of its broadcast rights for India's cricket league.

Disney+'s core offering also faced challenges in the U.S. and Canada, where the streaming giant lost around 300,000 subscribers. Disney was able to offset some of these losses by adding ~800,000 subscribers in other regions, but not by enough to offset the declines.

Amid the competitive streaming landscape, Disney is looking to narrow its subscriber loss and improve its positioning by adapting tried-and-true strategies from its biggest rival.

Netflix, after experiencing its largest quarterly subscriber dip in 25 years, has since rebounded — posting a 5.89 million subscriber gain in its most recent quarter.

Disney is borrowing Netflix’s playbook:

  • 📈 Pricing Adjustments: Similar to Netflix's recent moves, Disney announced it will be hiking prices. The cost of ad-free Disney+ will increase by $3 to $13.99, and ad-free Hulu is set to jump by the same amount, reaching $17.99. This price change is slated to take effect on October 12.

  • 🔒 Password Sharing Crackdown: Netflix's recent crackdown on password sharing drove record U.S. signups. Disney recently unveiled plans to follow suit with Disney CEO Robert Iger mentioning that the company already possesses the "technical capability to monitor much of this."

CANADIAN NEWS
👀 Canadian Banks Face Earnings Slump, Declining Capital Markets and M&A

According to RBC’s analyst Darko Milhelic, Canada's top banking institutions are set to experience a squeeze on their earnings this month — primarily driven by the slowing capital markets and mergers & acquisitions (M&A) revenues.

Here’s a glimpse of RBC’s 3Q forecast adjustments:

This translates to an average estimate change of -6.9% with a year-on-year EPS decline of -5.9%.

TD Bank appears to be in a more resilient position than its competitors, thanks in part to its successful integration of Cowen Inc, a diversified financial services firm headquartered in New York.

Mihelic emphasizes that TD's capital markets segment might experience a mild 6.3% revenue dip in capital markets. In contrast, other banks could face a sharper 10% slump year-over-year.

 FROM THE BLOSSOM APP

🎙 Top Discussions This Week

👇 Click on the post to open in the Blossom app (only works on your phone)

Financial Nirvana Mama / @tracy

Fraser McGuire / @frasermcguire

Brandon Beavis / @brandon

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