Penn Entertainment's stock ($PENN) closed down 13.7% on Thursday amid a lukewarm earnings report and after a Barstool Sports podcast host uttered a racial slur on air.
The company's Q1 earnings were released on Thursday, which missed Wall Street estimates. Penn earned $0.31 per share. Meanwhile, the average estimate in a survey conducted by Zacks Investment Research was for $0.38 per share.
And on Monday, host Ben Mintz said the slur while reading lyrics to the song "1st of tha Month" by Bone Thugs-N-Harmony. He was subsequently fired by Penn, which owns Barstool.
Penn's stock slid to its lowest since May 2020. The company lost $633 million on paper — $82 million more than it paid in total for Barstool.
Dave Portnoy and Barstool CEO Erika Nardini disagreed with the decision to fire Mintz, but they were overridden by Penn's board, which bought Barstool in full earlier this year.
Portnoy said Penn made the decision due to fear of retribution from state regulators that manage the company's gambling licenses, calling Mintz's comment an "innocent mistake."
In Massachusetts, Barstool Sportsbook faced hard questioning and a lengthy investigation from the state's gaming commission before the book was ultimately granted a license. While deliberating whether to afford Barstool a license, commissioners called into question the brand's moral compass.
“I’m having a hard time reconciling branding a sportsbook in Massachusetts … that I have concerns [for] not only responsible gaming, but simply the character and reputation and honesty of [that brand],” said commissioner Eileen O’Brien.
The company's history of racism, sexism and insulting behavior was dissected in deliberations, jeopardizing the company's ability to operate in the state of Massachusetts. Before Barstool was granted a license, at least four other sportsbooks were approved without further issue.
The sportsbook was ultimately approved after a series of hearings. It launched in its home state in March, alongside six other sportsbooks.
But, in other, more competitive states, it stands to reason that additional contention with state commissioners isn't in Penn's best interests.
Mintz's firing has fired up a portion of Barstool's base, which has waded deeply into the culture wars over the last half decade.
That base criticized Portnoy for allowing corporate interests to take over his company and remove his autonomy.
“So I got every Tom, Dick and Harry since this Mintzy thing saying, ‘pres, you’re a sell-out. Hey pres, you sold out,'” Portnoy said in a video. “… Yeah we sold the f–k out because that’s what you do when you’re an entrepreneur. You start this little company, you dream one day and you sell it the f–k out."
Penn paid $551 million in total for Barstool, buying out the remaining 64% in February for $388 million.
While Penn was down almost 14% on the day, the Nasdaq closed up 0.4%. Competitors Caesars (-1.5%), DraftKings (-2.8%) and BetMGM (-2.1%) performed worse than the aggregate market but far better than Penn.
A representative for Penn did not respond to a request for comment.
