The big news here is Penn Entertainment acquiring an exclusive online sports betting (OSB) license in the U.S. which grants it the use of the ESPN Bet trademark. This is a long-term deal lasting for 10 years. There’s also an option to extend it for another 10 years if both parties agree to it.
As part of this agreement, Penn has agreed to pay EPSN $1.5 billion over the course of the initial 10-year agreement. It has also granted the company $500 million in warrants that can be exchanged for 31.8 million shares of PENN stock.
There are also extra milestones that can be met through the agreement. If EPSN Bet’s performance goes well, ESPN could be granted warrants that would allow it to acquire another 6.4 million shares of PENN. The company also gets to choose a non-voting board member for Penn Entertainment after three years.
Jay Snowden, President and CEO of Penn Entertainment, said this about the ESPN deal:
“ESPN Bet will be deeply integrated with ESPN’s broad editorial, content, digital and linear product, and sports programming ecosystem. ESPN Bet will also benefit from PENN’s operational experience, extensive market access and proprietary technology platform, which successfully debuted in the U.S. this July.”
How This Affects PENN Stock Today
Today’s news has increased morale for PENN shareholders while also spurring heavy trading. As of this writing, more than 3.4 million shares have changed hands. That’s already above its daily average trading volume of about 3.2 million shares.
PENN stock is up 18.4% as of Wednesday morning, wiping out its losses since the start of the year.
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On the date of publication, William White did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.