M Resort operator Penn Entertainment will assume full ownership of sports betting subsidiary Barstool Sports on Feb. 17, but there was no mention on last week’s fourth-quarter conference call about bringing the business to Nevada.
Penn, which sold its operational ownership in Tropicana Las Vegas in September to Bally’s Corp., also operates Horseshu and Cactus Pete’s casinos in the Northeastern Nevada town of Jackpot, which draws business from neighboring Idaho.
Even with three casinos, Penn has shied away from bringing Barstool to Nevada for two reasons – the absence of remote sign-ups for sports betting, which requires a customer to register for the Barstool mobile app at a sportsbook, and questions of suitability surrounding Barstool founder Dave Portnoy.
“There was little in the way of commentary around the retention of the key personalities or structure of the relationship post the closing of the Barstool transaction,” Deutsche Bank gaming analyst Carlo Santarelli said of the agreement in which Penn will pay $388 million for 64 percent of Barstool. Penn bought 36 percent of Barstool in 2020 for $163 million.
Penn acquired Canadian sports betting operation theScore Media and Gaming for $2 billion in 2021 and said it will move Barstool to the company’s technology platform this year.
On the earnings call, Penn noted its interactive division, which includes Barstool, grew revenue 31 percent to $208 million with a first-ever quarterly profit of $5 million.
The fourth quarter revenue figure would have been higher except that Barstool was on the hook for a $10.6 million payout through its Louisiana operation to Houston gambler Jim “Mattress Mack” McIngvale, who made national headlines collecting a $75 million payout – the largest ever for U.S. legal sportsbooks – on the Houston Astros winning the World Series. Barstool had the third-largest payment out among McIngvale’s six wagers.
“We are anticipating a roughly $100 million swing in profitability in our interactive segment in 2023 as we are just beginning to scratch the surface of what we believe will be a tremendous long-term growth opportunity for us,” Penn CEO Jay Snowden said on the company’s conference call.
Stifel Financial gaming analyst Steve Wieczynski said Barstool lost market share in the U.S. jurisdictions in 2022 because the company’s reliance on third-party technology providers “hampered its ability to remain competitive.”
Penn opened Barstool sportsbooks at the company’s four Ohio casinos on Jan. 1 and a Barstool sportsbook at its racetrack casino in Massachusetts last week.
Snowden said Penn operates 31 retail sportsbooks in 14 states with a market share of approximately 18 percent. That doesn’t include Nevada, where Caesars Entertainment-owned William Hill operates sports betting at the three Penn-operated casinos.
Penn did not provide additional details about the planned $206 million hotel tower expansion at M Resort, which is expected to begin later this year. The expansion will add a 378-room hotel tower and other amenities, marking the property’s first major renovation since its 2009 opening.