More than ‘one bite’ at a time when Barstool’s Portnoy defends deal with Penn National By Howard Stutz, Executive Editor, CDC Gaming Reports June 23, 2020 at 7:30 pm Here’s what the gaming investment community learned during June: David Portnoy, founder and self-proclaimed “El Presidente” of the Barstool Sports media platform, doesn’t have a filter. He is willing to fiercely defend the stock price of Penn National Gaming, his company’s business partner, via wave after wave of profanity-laced rants on his various social media channels, each of which draw millions of viewers. Just ask Deutsche Bank gaming analyst Carlo Santarelli. Portnoy wasn’t happy with Santarelli – who has been following the gaming industry for more than a decade – after the analyst wrote in a June 7 research note that Penn is giving investors a “blue sky approach to sports betting.” The partnership with Barstool “has created a scenario in which the vertical is almost certain to disappoint over both the near and longer-term,” Santarelli wrote. In January, Penn agreed to pay $163 million for a 36% ownership stake in Barstool. Penn CEO Jay Snowden said the deal would change the makeup of Penn’s customer base, adding a Millennial and Generation X dynamic, which compliments the company’s “omnichannel growth strategy.” Penn will rebrand its retail sportsbooks under the Barstool theme, and the companies are creating a mobile sports wagering app and online casino site which are expected to launch this fall. Santarelli said in the June 7 note there was a “considerable downside risk in Penn shares, given the exuberance around sports betting that is currently priced into the stock.” David Portnoy, Erika Nardini of Barstool Sports and Penn CEO Jay Snowden (right) discuss the deal with CNBC’s Jim Cramer in January/Photo via CNBC Santarelli’s measured, reasonable analysis set Portnoy off. During the pandemic, he launched a live-streamed day trading business dubbed “Davey Day Trader Global,” where he buys and sells shares of companies in various industries. The stream includes Portnoy’s video commentary. Lately, airline companies have been the focus of his wrath. After Santarelli’s downgrade on Penn from a Buy to a Hold, Portnoy let loose with a pair of video rants,“This Deutsche Bank suit who downgraded Penn is a moron,” and “#DDTG Needed an Enemy. Carlo ‘Santilo’ Woke Me UP.” He misspoke Santarelli’s name – “Arthur Santillo, Carlo Fonzarelli,” – and said the analyst writes his reports “on an IBM typewriter.” Santarelli took the comments in stride. A day later, he signed off an IGT-Churchill Down note as “Santillo.” He used the same sign-off on a Wynn Macau note three days later. On June 17, he used “Pinstriped Suit Santillo” on reports involving Caesars Entertainment and Eldorado Resorts. In follow-up note Monday to his June 7 commentary, Santarelli went right after Portnoy, headlining the report, “Just One Bark, No Bite…,” a direct reference to the Barstool founder’s hugely popular “One Bite” pizza parlor reviews. He also looked into any influence Portnoy’s day trading had on Penn’s stock price, referring to it as the “Dale Doback Trader Prestige Worldwide show.” “We received limited pushback to our downgrade from fundamental investors, with the bulk of the pushback, as expected, being that of the unprovable bull case for sports betting,” Santarelli wrote Monday. Penn’s Nasdaq-traded stock moved into the $40 per share range when the Barstool deal was announced but saw its value disintegrate when the coronavirus pandemic hit. Penn was trading as low as $3.75 on March 18 during the height of the COVID-19-influenced nationwide casino shutdowns that silenced the company’s portfolio. On June 5, Penn reached a 52-week high of $40.15 a share. Legal sports betting has sucked the air out of the casino space. Gamblers nationwide wagered more than $13 billion legally on sports in 2019, a figure that would have easily been eclipsed this year if the pandemic had not shuttered professional and college sports. There are now 18 states with legal sports betting operations. Four more states – Tennessee, North Carolina, Virginia, Washington – have approved sports betting laws and could launch later this year. The sports betting operator space is filling quickly. DraftKings went public in April. FanDuel has expanded through a deal with Boyd Gaming. BetMGM, the partnership between MGM Resorts and GVC Holdings, is moving beyond MGM properties, as is BetRivers.com. And the scope of William Hill US will increase when the company takes over the Caesars sports betting operations, as is expected to happen, following the $17.3 billion merger with Eldorado. Stifel Financial gaming analyst Steven Wieczynski echoed Santarelli’s view of Penn in a research note Monday, saying the shares are currently “caught up in the sports betting/iGaming trading euphoria.” Investors, he said, are overlooking Penn’s core operations and not valuing the casinos properly. On Monday, Portnoy, Barstool CEO Erica Nardini, and Snowden talked up the casino business restart on CNBC’s “Mad Money” with Jim Cramer. Penn has reopened 30 of its 41 properties in 13 of its 19 states, albeit with limited capacity and under various COVID-19 health, safety, and cleaning protocols, per various state and regulatory guidelines. #commentary – More than ‘one bite’ at a time when Barstool’s Portnoy defends deal with Penn National. –@howardstutz, Executive Editor, CDC Gaming Reports. https://t.co/CPorKsPZBE #CDCgaming @barstoolsports @stoolpresidente — CDC Gaming Reports (@CDCNewswire) June 24, 2020 Nardini, who has been with Barstool for four years and has finance and marketing experience with Yahoo!, AOL, and Bkstg, is sort of the adult in the room when Portnoy is around. She told Cramer that Barstool’s fanbase of some 66 million followers was unmatched and Penn is “going to crush it” when sports returns in the fall and in 2021 and 2022. Investors may have been listening. Penn’s shares closed Tuesday at $36.82, up $5.39 or 17.15%. Howard Stutz is the executive editor of CDC Gaming Reports. He can be reached at email@example.com. Follow @howardstutz on Twitter.