Another day, another sportsbook operator getting nearly $1 billion from the public markets. This time, it’s newcomer Barstool Sportsbook.
Penn National sold 16.1 million shares at $61 each to raise $982.1 million in gross proceeds. The regional casino operator used standard language in its SEC Form 8-K detailing the transaction, stating general corporate purposes that might include long-term growth initiatives.
Penn CEO Jay Snowden laid out exactly where most know the funds are going: the US sports betting market.
“This successful offering provides our Company with additional resources to accelerate our unique omni-channel strategy, including launching the Barstool Sportsbook app in new markets, developing new products and features, establishing Barstool-branded sports bars and retail sportsbooks and reimagining the customer experience at our casinos, all while fortifying our balance sheet.”
“Omni-channel” is just a fancy way of describing a strategy that combines mobile and retail environments. So essentially, Barstool Sportsbook is coming fast to a state and casino near you.
Barstool Sportsbook app coming to new states
Penn National dove into much more detail in its updated investor presentation, which outlines seven states where the Barstool Sportsbook app will launch next:
- Colorado
- Illinois
- Indiana
- Michigan
- New Jersey
- Virginia
- West Virginia
That’s an update from just Michigan and New Jersey being high on the list as possibilities that could launch by the first quarter. There’s no timeline given in the investor presentation.
Will Barstool Volunteer?
One notable exception to the list is Tennessee. The state has no limit on its online-only licenses, which means any current US sportsbook operator should be able to land a license without an issue.
The state’s regulations aren’t perfect, though. Operators who want to offer sports betting in Tennessee have to hold a minimum of 10%, which is unlike any other US betting jurisdiction. Only three operators are licensed there so far: BetMGM, DraftKings Sportsbook and FanDuel Sportsbook.
So far, no sportsbook has said explicitly they are not interested in the market because of that stipulation. Penn did not give an answer to why Tennessee was left off the list when asked.
Penn also teased new sportsbook features that include shareable bet slips, live streaming content and more integrations of Barstool content. Those, too, lacked timing details.
Retail rollout accelerated as well
Penn now expects all of its retail sportsbooks to be converted to Barstool-branded books by the end of 2021. There are currently four retail sportsbooks under construction.
It’s easy to see why Penn National is concerned about retail sportsbook experiences despite states like PA and New Jersey taking more than $8 out of every $10 bet online.
First, the Barstool integration allows retail casinos to hold live events with Barstool talent. That will likely bring in a demographic that’s much different (see: younger) than the typical regional casino visitor.
The numbers also show retail betting is valuable to Penn. A retail sports bettor is worth just 0.6 times what a standard retail casino customer is worth. If a customer is involved in both, however, their theoretical value is 5 times that of the casino-only customer, Penn said.
What’s the market-share goal?
Penn is still targeting 13% of the sports betting and online casino market, though that’s based off higher projections than the last time the company updated its omni-channel strategy in May.
Penn is now using Barclays Research‘s estimate of $24 million in combined revenue by 2025. Previous estimates were based off a mature market of $19.4 billion from Susquehanna Research.
The company needs to add 6% of the 66 million users to its active database of 5 million mychoice members to hit that 13% share.
Penn National stock is trading above $74 as of Thursday afternoon.
PA handle rose in second weekend
Snowden also used the release as an opportunity to boast of Barstool Sportsbook’s success in the Pennsylvania sports betting market.
Handle hit $12.5 million in its second weekend, up 14% from the $11 million it took the weekend after it officially launched Sept. 18.
Penn boasted that was done with no money spent on external marketing, but that’s not entirely accurate. The company paid $163 million for 36% of Barstool Sports earlier this year. Those Barstool personalities would not be pushing Penn’s product without that investment.
Pennsylvania could well be headed for a record betting month after a record $365 million was bet in August, so it’s hard to gauge Barstool’s performance so far. It seems clear, though, that Barstool is in the running to grab the third-place spot for PA market share behind FanDuel Sportsbook and DraftKings Sportsbook.
Penn reported other overall positive financial figures in the investor presentation. Its expected third quarter revenue and EBITDAR ranges are both higher than street consensus. Pro forma net traditional debt is also around $1 billion after the share sale, which Snowden called a “significant reduction” from the pre-coronavirus operating days.
Some finer Barstool details from PA
Penn National also gave some granular detail on that first weekend of operations in Pennsylvania with a couple of noteworthy points.
First, Penn National met a lot of new customers: 95% of its US registrations were new to Penn’s database. We don’t know exactly how many that is though, as Penn didn’t break out how many registered out of the 180,000 downloads.
We do know that of the 24,000 of the 30,000 app downloads in Pennsylvania led to registrations. Half of those registered made their first deposit that weekend, with an average deposit of $243.
One of the most interesting notes, though, shows the impact the Barstool brand brings to a sports betting operator. Of the $11 million bet the first weekend, 22% of that handle came from picks promoted by Barstool.
US sportsbooks have plenty of cash
We’re still in the early innings of legal US sports betting, which is clear from how much cash everyone is raising.
The Penn share sale brings cash raised by the parent companies of US sportsbooks close to $4 billion this year:
- DraftKings Sportsbook raised more than $1 billion by going public and share offerings.
- FanDuel Sportsbook parent Flutter raised $1 billion through share offerings.
- PointsBet raised nearly $250 million through share offerings.
- MGM Resorts and GVC Holdings committed an additional $250 million to Roar Digital, which operates BetMGM.
In case that wasn’t enough, two more sportsbook brands are likely to get access to the public markets soon. BetRivers parent company Rush Street is going public through a SPAC and William Hill, already public in London, is being bought by Caesars.
