🍕Barstool becomes an (almost) half-icorn

Thursday, January 30, 2020 by Robinhood Snacks |
_Wondering how many Stoolies showed up..._

Wondering how many Stoolies showed up...

Yesterday’s Market Moves
Dow Jones
28,734 (+0.04%)
S&P 500
3,273 (-0.09%)
9,275 (+0.06%)
$9,342 (+3.13%)
10-Yr US Treasury

Hey Snackers,

Let's address the elephant in the room: a literal elephant was wandering around a 5-star hotel.

In its first major policy meeting of 2020, the Fed decided not to make any game-changing moves, and kept interest rates steady. Markets didn't make big moves either.


Cue the Sweet Caroline playlist... Penn National Gaming shelled out $163M for a 36% stake in Boston-raised Barstool Sports. You've heard of Barstool, the sports-culture blog/video/pod-producer famous for "irreverent" content. You probably hadn't heard of Penn National, which operates casinos like Tropicana and Margaritaville — its shares soared 11% on the news. Here's the deal:

  • Barstool gets its valuation bumped close to half-icorn-worthy $450M (almost half a unicorn).
  • Penn gets exclusive rights to use Barstool's brand in its sports-betting products (which its casino biz is going in big on).
  • Barstool's founder (and fellow early employees) keep 28% ownership of the company.
  • FYI we figured out the formula to all Barstool merchandise:

[Insider fan joke] + [Silhouette of athlete] = Barstool t-shirt

It's all about the eyes (and ears)... Media companies boil down to one word: Audience. That's where the real value is for them (and their investors) — Barstool brings in nearly $100M in revenues annually.

  • Access: Since launching in 2003 as a Tom Brady-worshipping physical newspaper, Barstool hustled to build an audience of 66M "Stoolies."
  • Special Access: That audience is particularly likely to be into sports/gaming (62% of Stoolies bet on sports, and 44% of those gamblers do it at least 1x/week).
  • Brand: Penn wants more flat-brims in its life. "Sports betting attracts a new, younger demographic than traditional casino gaming." That's straight outta Penn's investment presentation deck.
  • Conversion: Penn is betting it can convert Barstool's audience into its casinos and sports-betting app better if it owns the content and can promote itself there.

Brand is (almost) everything... Since the Supreme Court cleared the way for states to legalize sports betting (Jersey went in hard on this), the race for customers has been heated. Sports betting rivals like FanDuel and DraftKings lead thanks to their well-known logos sponsoring almost every arena bar area. To compete, Penn needs a popular sports-ish brand with a big and relevant audience. Barstool checks both boxes.


Not a secret.. Les Wexner, the billionaire owner of Victoria's Secret parent L Brands, is in talks to step down from his CEO-ship and possibly sell the lingerie brand (WSJ reports). The 82-year-old is the longest-serving CEO of any S&P 500 — and besides V's Secret, he also turned around Abercrombie & Fitch and scaled Bath & Body Works into mall staples. But his association with Jeffrey Epstein hasn't helped.

  • Vicky's struggled the past few years with falling sales and shrinking relevance – stores are too dark, the fashion show's outdated, and pushups missed out to the bralette trend.
  • L Brands as a whole is losing value — it was worth $29B at its 2015 peak, and is now worth less than $6B. But the stock jumped 13% on word Les may be out.

Spin-off the problem brand... focus on the clean one. Bath & Body Works has shown annual sales growth for 9-straight years (guess the foaming hand soaps never get old). Bath & Body's hygiene and self-care is tapped into the wellness trend, and is L Brands' star performer as Victoria's falls.


Fashion is constantly evolving... And fashion brands succeed through change. VS didn't change. Its sales fell as customers turned to brands more focused on comfort and inclusivity, like American Eagle's Aerie (which enjoyed 20-straight quarters of double-digit sales growth). L Brands cancelled the VS fashion show in an effort to re-invent its marketing — but it may take a new leader (and Les leaving) to save Victoria.

Slim down

All those ads interrupting your Insta-scrolling?... They added up to $70B of revenue for Facebook in 2019. Although that sounds like Zuck & Co. should be celebrating their dominance in online ads sales, that was up only 27% from last year (and slower than the 35% revenue growth the year before). Shares fell almost 8% on word Facebook's profit got squeezed:

  • Revenue growth is slowing: 240M new people joined a member of the Facebook "Family" (Insta, FB, WhatsApp, Messenger) over the past year — that's a smaller number than years past. The Book's also losing people to TikTok and Snap (or you just put your phone down).
  • Cost growth is speeding up: Facebook's feeds are the #1 targets for bad people to manipulate and abuse others online. Humans and algorithms to police those online streets are expensive — and so are the fines Facebook's seemingly always paying.
  • The result is skinnier profits: In 2017, Facebook made 50 cents of operating profit for each dollar of ad sales. In 2019, that came down to 34 cents.

The whole world pays a 7 cents per day "Zuck fee"... To show investors that Facebook is growing despite weakness in its core Facebook app, Zuck included Instagram for the first time in its "average revenue per user" category. Globally, Facebook made $25 off each user last year. That's 2.85B people with Facebook accounts, "paying" 7 cents per day in mid-scrolling attention to Facebook's ridiculously-targeted ads that know you like chocolate.

What else we’re Snackin’

  • Blockbuster: Chinese movie theaters have shut down on coronavirus fears — the global box office may lose $1B+ from its 2nd-biggest movie-watching market
  • Rolling: Tesla jumps 12% after earnings reveal its Model Y crossover production is up and running
  • WeSober: WeWork is getting rid of free beer/wine taps at North American locations (but keeping the elaborate fruit water)
  • Electrify: Remember massive Lincoln Navigators? Ford is launching Lincoln e-vehicles with electric auto startup Rivian
  • C-Crew: J.Crew hires new CEO, Jan Singer (former Victoria's Secret exec and CEO of Spanx), after a long sales slump
  • Lyfted: Lyft lays of 90 employees (1.6% of its total) in sales and marketing roles, on its quest to turn a profit in 2021

By the way, Snackers — we want to treat you guys. Sign up for Robinhood, our commission-free investing app, and get a free stock. Already on Robinhood? You'll still get a free stock for getting a friend to sign up (they'll get one too).


Disclosure: Authors of this Snacks own shares of Tesla and Amazon

ID: 1074797