How Barstool Sports went from a $551 million deal to $1

A highly regulated casino company paid $551 million to buy a small sports media site called Barstool Sports. 3 years later, they sold it back to the guy who was the founder and sole owner of it for $1. Yep, one single dollar. Along the way, they wrote off $850 million in losses. The CEO went on a call later and basically says, we shouldn't have bought this thing, it was a huge mistake. How does a brand that was at one point worth half a billion dollars go to less than the value of a cup of coffee in less than 3 years? That's what this video is about. This is the rise, the fall, and the redemption of Barstool Sports. Whatever, you do what you like. By the way, I turn every single one of these videos into a cheat sheet you could download to learn more about the story. You can get the one for this one on my website, girdley.com/youtube. Oh, and by the way, thanks to Bolt.News for sponsoring this video. More on them later. This video, I understand there are a huge number of Dave Portnoy fans And there are gonna be some stuff in the comments that are gonna correct things I get wrong. Look, I don't study this stuff and live it like many of you do, so go easy on your boy, okay? How this all happened starts back in 2003, and a young entrepreneur named Dave Portnoy quits his job, gets $60,000, and starts a newspaper, and he starts handing 'em out for free at Boston subway stations. His first venture there is a gambling tip sheet. A lot of the early issues, according to people who've read 'em, are like old man yelling at clouds. Just basically, you know, kind of not that sophisticated. Nobody in media took him seriously. He was basically counter-positioning the entire idea of what it meant to be in journalism. He brought in a cast of characters, Big Cat and a bunch of other guys, and named himself El Presidente, which is Spanish for the president. The normal media organization was buttoned up, wear suits, and went through approval processes. Barstool Media started to run like a pirate ship with Dave Portnoy as the captain. As the 2000s turned into the 2010s, people started to realize that Dave was on to something. The old way of doing media that felt very basically antiseptic and cold, it was done for. Millennials who were coming of age at this time wanted to be part of a tribe. Well, and for a segment of them, that's entirely what Barstool Sports offered. So in 2016, a group comes in, the Chernin Group, and they pay reportedly between $10 to $15 million for a majority stake of Barstool. They brought in a professional CEO named Erika Nardini. And they launched a new show called Pardon My Take, which astronomically went to number 1 on the sports charts within a week. Launched a myriad of other properties: Spittin' Chiclets, Call Her Daddy, Sports Are for the Boys. Basically, if you were a young testosterone-filled male, they were trying to speak to you. Well, except for Call Her Daddy, which spoke to, you know, hormone-filled people of the opposite sex. ESPN wasn't blind to this whole thing. Them and other legacy media tried to adopt the same stuff, but there was a problem. In 2017, ESPN had given Barstool a show on ESPN2, but they had to cancel it after one episode. The reason was ESPN's own talent revolted at the idea of it being on them. Portnoy is a genius of public relations, and if you're on social media, you see his stuff. And at this moment, his intuition was not to apologize. He turns this cancellation of an emblematic moment of everything that the brand he was creating was about— anti-establishment and anti-corporatism. He had learned something. Punching up is good business sometimes. You punch up at somebody bigger than you, you start a fight, and people love to root for an underdog. In 2019, Barstool is doing $90 to $100 million reportedly in annual revenue. If you were a young man who liked sports or was interested in the type of stuff young men talk about, Barstool was the place that was speaking to you better than anybody else was, and advertisers had seen that. And as the 2010s had gone along, you have to understand the environment we were living in. Classical kind of incumbent media was totally lost at how to talk to younger folks. Just the things that they had done for so long— Super Bowl ads, TV ads, magazine ads— they didn't work anymore. Penn National Gaming was one of those. It's a casino operator. And they decided in 2020 they were going to throw money at Barstool, a check for $136 million for 36% of the company, valuing it at $450 million. All of this starting from a sketchy newspaper that had been handed out in 2003 in Boston subways. This is a point that's worth noting. If you look at everybody who gets super rich in the United States, they don't do it through W-2 salaries. A few do, you know, LeBron James and guys like that. But the real earnings come from owning equity and stuff. And the guy who got paid because he owned the equity in Barstool was Dave Portnoy. Penn Gaming actually, in retrospect, looks pretty dumb for doing this deal. But at the time it looked pretty smart. You see, back in 2019, there had been some court rulings about the NCAA that were going to be really important. The case was Murphy versus the NCAA. And it basically started a land grab where betting legalization was coming across the United States. And folks like DraftKings and FanDuel were paying $300 to $500 per customer to get people betting with them. Looked at Barstool and said, hey, we'll use these guys and Barstool Sports as a Trojan horse to get every young man who sees them coming to gamble with us. And when they told Wall Street this idea, the Penn Gaming guys did, Wall Street loved it. They thought it was a great idea. Then timing was immensely bad. 6 weeks after the deal closed, COVID came and all live sports basically shut down kind of, well, until further notice. But before we get to that, I wanna talk about today's sponsor, Bolt.new. And the reality is in today's era of AI coding, it is really easy to ship stuff really fast when you build a new application. The hard part is making sure the stuff is ready for production and scale. And oftentimes these apps that you create using AI and that sort of thing, they work great 'cause they're in the generator's own code environment. Bolt.new is a new service that allows people building AI apps the best of both worlds. You have the speed and flexibility that comes from AI-centric development of new applications, but at the same time you have an environment in which you can trust those applications to scale and perform. With Bolt.new, you can build apps that are ready to basically be functional in whatever environment you're doing. You're not just building little code snippets that you have to assemble together yourself. You're able to look holistically at the entire application and deploy them and be ready for the real work. So that's why Bolt.new is the choice for many who want to accelerate their development, whether they're building a new project from scratch or accelerating their existing development schedule to bring stuff to production faster. Rapid development you can get anywhere, but if you want rapid development you can trust, that's what Bolt.new is about. Encourage you to check them out in the links below. Tell them we sent ya. Bolt.new. Barstool should have died at this point. If you can't talk about sports, well, why are people going to care? Portnoy's a PR genius, as I said before. He starts to play the stock market on livestreams. He goes out and he does pizza reviews of local pizza joints. And then the pièce de résistance— that's French for you guys paying attention— is a $41 million fund he raises to help small businesses during the COVID era. At the moment, Penn is ecstatic. From their 36% seat, they're seeing, you know, Dave Portnoy position himself as a mainstream character. Ironically, this moment caused Penn to believe that the mainstreamization of Barstool Sports was a possibility. But it turned out it had just been a flash in the pan. The combination of COVID and Dave's personality colliding at a, uh, once-in-a-moment position in history. Penn Gaming stock recovers to $144 by 2021, a 35x recovery since their low point during COVID Remember 2020? On the back of this, Penn Gaming launches the Barstool Sportsbook in Pennsylvania. 21,000 downloads in opening weekend, and by 2021 they have 42% of the online gaming market in Pennsylvania. Why did they do that? It's because so many people had been trusting and watching Dave Portnoy for years, if not decades. And when he was ready and they were first to market, he got them out. And it was a flash in the pan that enabled Penn to get an early lead. Comeback later in this story is Penn didn't buy what they thought they were buying. They thought they were buying a brand. In reality, they were just buying one guy. The Barstool brand was synonymous with him. And normally when you buy a business, the first thing you want to figure out is, hey, this person I just bought this business from is now suddenly very rich and not as motivated to work hard and definitely not as motivated to have my good interests in hand after I buy the thing. So that means you plan for what happens when they exit stage right and leave the company. Penn just fundamentally didn't understand how the business they bought was actually working. Penn, because of that, kept writing checks. More infrastructure, more talent, more shows, more promotion. But all they did was just expand Dave Portnoy's own personal brand, making it that much more tough for them to get away from him if they ever decided to. Not the only personality-driven acquisition in history that's failed. Vice Media is another one. Gotta be careful with this stuff. By the way, this YouTube channel is entirely different. If somebody wants to pay me a gazillion dollars for it, I'll do whatever you want forever. Yeah, just so you know. If you're finding this stuff useful, do me a favor, click follow or subscribe on YouTube at least. I'm trying to get to a million. We just passed a quarter million suckers watching me walk through this drainage ditch. It's nice down here. So fast forward into 2021 and we are in the middle of the cancel culture era. Everybody's stuck at home and looking for victims. And in November 2021, there start to be allegations coming out about sexual misconduct by Dave Portnoy. Penn Gaming stock drops 20% in a week. In February 2022, there's 6 accusers now in total. Portnoy fires back and files a defamation suit. It doesn't go anywhere and he drops everything before trial. You see, Penn is a highly regulated company. Something like this happening is a nightmare. The people who are overseeing gambling want it to stay as clean as possible. They're dealing with the echoes of the '40s, '50s, and '60s when the mob controlled a lot of gaming. So they want people in the business to have squeaky clean resumes. Massachusetts holds hearings into Barstool Sports activity and Portnoy activity. New York launches online gambling and just leaves the Barstool portal for gambling out of it. State of Ohio fines Penn $250,000 for an underage person sneaking into a Portnoy event. Normally when stuff like this happens to big corporations, they go to the Capitol and the regulators. They try to deal with stuff behind closed doors. But what Penn had bought in Portnoy was somebody who decided to do exactly the opposite. Portnoy had a webcam that Penn couldn't control, and he was out on social media. He was doing videos like by the dozen. I remember how many were coming out this time. And along the way, he's launching this $41 million fund for small businesses and doing pizza reviews. Penn had thought they were buying his audience when in reality that was something entirely he controlled because they were all loyal to him. Not the Barstool name. But there was a bigger problem going on for Penn Gaming, which was by 2023, basically the Barstool gambling app wasn't even in the top 10 for sports anymore. Kings is number 1, FanDuel is number 2. They'd all been just throwing money at crazy, crazy amounts to try to get gamblers. And by November 2023, Barstool Sports has gone from kind of the 40-ish range of marketing position for gambling down to 4.5%, basically an afterthought. Noy's charisma and relationship to his audience had gotten people to try the app, but when they got a better deal from DraftKings or FanDuel, they jumped quickly and started gambling there. I told you that Barstool had never really figured out how to keep the secondary personalities around inside of their enterprise. Well, at that moment, the number 2 star and arguably even bigger than Portnoy was named Alex Cooper, and she had a show called Call Her Daddy. The show had become 15 to 20% of Barstool's revenue, and she just jumped ship to sign a deal with Spotify for $60 million. The pirate ship that Dave Portnoy created was great at launching stars and it was horrible at keeping them. And Alex Cooper wouldn't be the only one. And they were all there getting launched, making a little money with Dave and his team, and then eventually leaving when Netflix or Spotify paid them more. What next happened was incredible. In February 2023, despite all of these red flags, PennGaming steps up and buys the remainder of Barstool Sports in cash from Portnoy. They buy the remaining 64% of Barstool for $388 million. Their total outlay is over $550 million. The CEO goes out and tells investors they're making a great move. By August 2023, they would come back and sell the entire site to Portnoy for $1. $850 million cash impairment and their stock price goes down by over 85%. An analyst quote basically said that the rightful owner of Barstool Sports should be Dave Portnoy. Only after $550 million did they realize what they'd actually bought. Type of edgy content and the guy he was was not appropriate for a highly regulated company like Penn Gaming. Interestingly enough, the fine print of the deal has an interesting clause. If Portnoy ever goes out and sells it again, they get to keep 50% of the proceeds. But the reality is he is Barstool Sports, and there's no reason for him to ever sell it. Same press release on the same day, Penn Gaming announced a new deal explaining why they had moved so quickly, and that deal was they had partnered to create ESPN Bet, with ESPN. They wrote off the entirety of their investment in Barstool Sports and immediately committed $1.5 billion over 10 years to ESPN. 2023, ESPN Bet launched nationally. The goal was to be top 3 amongst the gambling apps. There was a problem. Over the next 18 months, they'd never get there. 2024, they had a measly 5% of online gambling despite being the brand for online sports, ESPN. September 2025, that's only 2.7%. Based on these numbers, Disney and ESPN terminate the partnership. That week, ESPN signed up with DraftKings. And if you look at the math here, it's kind of crazy. Penn Gaming spent $4 billion and took their stock on the Mr. Toad Wild Ride of the century to basically end up exactly where they started. And today, Portnoy has gone on record to say, I am Barstool Sports. I'll never sell it. I kind of believe him. There's a funny quote that gets thrown around in businesses a lot. Which is when your opponent is making a mistake, don't tell them about it. Just let them do it. And Portnoy is a pretty straightforward guy. I got to imagine he told them they were making a mistake when they bought his company in the nicest way possible, which is, look, I'm just a humble guy. I don't know what I'm doing. And you guys, well, you seem to know what you're doing. So by all means, let's make a deal. And that whole thing caused him to walk away with over $500 million. And man, got to hand it to him. All right. That's the rise and fall of Penn Gaming's effort with Barstool Sports. Let me know what you think in the comments below. And, uh, if you like this, say something nice and encourage me to make more of these. Catch you next time.