Penn National closed its public stock offering, announcing today that the PA-based company raised $982.1 million in the sale of 16.1 million shares of $PENN stock.
Jay Snowden, president and CEO of Penn National, said in a press release:
“This successful offering provides our company with additional resources to accelerate our unique omnichannel 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.”
As of June 30, Penn had net traditional debt of around $1 billion, “representing a significant reduction from pre-COVID-19 periods,” according to the presser.
Penn stock undeterred by stock offering
Penn’s stock price opened Tuesday at $72.71 and closed the day at $69.41. Considering $PENN was trading around $69 when the public stock offering was announced in the middle of last week, it appears any concerns of stock value dilution are unfounded in the short term.
Snowden continues to laud Penn operations as the company bounces back from a devastating period of casino closures in Q1 and Q2. On Wednesday, he predicted Q3 earnings above projections.
“We are extremely pleased with the operating performance of our properties this quarter, despite continued occupancy restrictions,” he said. “Penn National currently continues to expect 3Q20 consolidated revenues will range from $1,040 million to $1,145 million and 3Q20 consolidated adjusted EBITDAR will range from $410 million to $450 million, consistent with the ranges previously reported in our prospectus supplement. In short, we believe our company is incredibly well positioned for long-term success based on its highly differentiated approach to both land-based and interactive gaming and sports betting.”
Barstool hopes remain high
Penn National’s stock activity and cash infusion followed the much-anticipated launch of the Barstool Sports Betting app in PA on Sept. 18. The early launch numbers provided by Penn last week were promising, with 30,000 iOS app downloads in PA, 12,000 first-time depositors and $11 million in bets over the app’s first four days in operation. Snowden said:
“This is a very exciting time for our company. On September 18, we officially introduced the Barstool Sportsbook app in the state of Pennsylvania, which broke records for the most downloads ever for the launch of a new mobile sportsbook, and it generated impressive handle. This momentum has continued into our second week of operation, as this weekend’s handle grew by 14% over our initial weekend despite continuing to spend $0 in external marketing.”
By our calculation, its opening weekend numbers put Barstool Sportsbook in position to contend with DraftKings for second in PA sports handle, while FanDuel remains dominant. The 14% increase Snowden reported puts Barstool’s four-day total for last weekend (Friday-Monday) at $12,540,000, or $3.1 million per day.
This is more than DraftKings did daily in August, Pennsylvania’s best month yet for sports betting handle. But the Barstool average is inflated by excluding weekdays with no football action. Additionally, the August numbers were pre-NFL, so they should go up in September.
Barstool marketing strategy and the bottom line
With the loyal fanbase that comes with Barstool, it’s likely that many of the early adopters of the app are new to the sports betting market as well. That could mean Barstool will help expand the sports betting market in PA, rather than simply taking market share from existing operators. This will prove important for Barstool, as it joins a crowded market, becoming PA’s 10th online sportsbook.
Also important for its bottom line is marketing spend, which Snowden mentioned remains $0. But recall that the 36% stake in Barstool cost Penn an initial investment of $163 million in cash and stock back in January. That’s not to say the investment won’t pay off. The whole Penn National sports betting strategy — a big part of its “omnichannel strategy” — rests on Barstool’s built-in customer base, consisting primarily of a prime sports betting demographic.
Dave Portnoy, Barstool founder and “el presidente,” continues to drive his followers to the app and encourage betting action through his various social media channels. So far, the strategy seems to be working for Penn in terms of handle and popularity of the app.
But some legal gambling proponents have expressed concern over Barstool personalities’ generally sarcastic messaging around responsible gambling and other questionable marketing that could potentially do harm to the legal sports betting industry.
As Jess points out, discouraging messaging involving minors is literally the first thing in the AGA’s new sports betting marketing code that is two weeks old and Penn National signed onto. So let’s see how self regulation works out. https://t.co/30RPVjIwXP
— Dustin Gouker (@DustinGouker) September 28, 2020
What’s next for Penn National and the Barstool brand?
As Snowden alluded to in the Tuesday press release and elsewhere, Penn National plans to expand the Barstool brand to additional states via more betting apps, sports bars and retail sportsbooks. Its recent stock offering aims to help with that.
In an investor call Wednesday, Penn said construction is underway on retail Barstool books at four of its 41 gaming properties. It also plans to have all major land-based retail sportsbooks rebranded by the end of 2021.
Last we checked at Hollywood Casino at Penn National Racecourse in Grantville, PA, rebranding of the sportsbook to Barstool was yet to begin.