Sometimes business owners thrive in spite of the vicious and unaccountable mediocrities who staff government regulatory boards.
In Episode 21 of “Tucker on X,” posted to X, formerly called Twitter, on Thursday, Barstool Sports founder Dave Portnoy explained how he first sold his company for approximately $600 million and then bought it back for $1.
Host Tucker Carlson, in the accompanying caption, called Portnoy’s move “the most impressive business transaction of our lifetime.”
Portnoy’s epic move required two crucial elements.
First, Portnoy has made enemies. In fact, his straightforward and irreverent brand of sports commentary has alienated many people, and in this case, their enmity worked to his advantage.
“I probably owe all my haters, of which there are many, a ‘thank you,’ a postcard maybe,” Portnoy said.
Still, Portnoy’s magical transaction required more than hatred alone. After all, millions of people hated the 19th-century oil magnate John D. Rockefeller, and yet not even Rockefeller could have done what Portney did.
Second, Portnoy needed an aggressive and near-omnipotent class of government regulators — something Rockefeller never faced.
With characteristic disdain for his detractors, Portnoy described these regulators as meddlesome bureaucratic types with useless undergraduate degrees.
“They’re small liberal arts people,” Portnoy said, who “can make your life hell.”
Ironically, the combination of regulators’ unchecked power and hatred of Portnoy allowed the Barstool Sports founder to take the business he once sold for a small fortune and recoup it for pennies.
In fact, Portnoy has sold and recovered his business not once but twice.
“We actually sold it to Chernin Group in 2016, a media group, and then we sold it again in 2021,” he explained.
The Chernin Group is a holding company specializing in media and tech. Portnoy did not elaborate on the circumstances of that first sale.
The second sale began in 2020 when PENN Entertainment, a Pennsylvania based gambling company, purchased a 36 percent stake in Barstool. According to Fox Business, PENN launched its Barstool sports app the following year. Hence Portnoy’s reference to 2021. PENN then completed its purchase of Barstool in early 2023.
All told, between Chernin Group and PENN, Portnoy has sold his business for a total of roughly $600 million.
In his interview with Carlson, Portnoy discussed only the second transaction.
PENN purchased Portnoy’s business hoping to expand its own profitability by tapping into the Barstool Sports audience.
Alas, according to Portnoy, gambling regulators then subjected PENN and Barstool to unprecedented scrutiny. The “small liberal arts” bureaucrats hated Portnoy, so they made life miserable for the new buyers and partnership.
“A gambling regulator can say — do whatever they want. They can make up the rules, make up the laws,” Portnoy said.
Together, PENN and Barstool could not prosper in the gambling business.
“We underestimated the regulators,” Portnoy said.
PENN’s status as a publicly traded company also required expenditures unknown in Barstool’s history. Maintaining regulatory compliance, for instance, meant that Barstool now had to hire many new people in multiple new departments.
Portnoy explained that this involved “things that I never dreamed about as a private [company] — not only on the financial books but HR.”
In short, the PENN-Barstool partnership could not satiate the regulatory monster.
PENN CEO Jay Snowden confirmed that his company had sold the Barstool back to Portnoy.
According to Variety, Snowden told investors that as “part of a publicly held, highly regulated, licensed gaming company, it became clear that we were an unnatural owner” for Barstool and that “there’s probably long term only one natural owner of Barstool Sports, and that’s Dave Portnoy.”
Snowden’s comment strongly suggested that gambling regulators had a problem with Portnoy, not PENN.
PENN moved on to a deal with ESPN.
Meanwhile, Portnoy re-acquired his now-unprofitable company for the minuscule sum of $1. He told Carlson that Barstool lost roughly $10 million last year.
“That seems like a lot,” Carlson quipped.
“It is a lot. It’s a ton. But I’m rich, and I can fix it,” Portnoy replied.
That sort of bravado helps illustrate how Portnoy succeeded in the first place — how he achieved the American dream by starting out with a few newspaper stands in Boston and becoming a multi-millionaire through the force of his own talent and hard work.
In truth, now that he has achieved success, Portnoy explained that he purchased his old company primarily to save the jobs of people who had spent years working for him.
PENN, of course, had its reasons for jettisoning Barstool.
The government regulators who made life miserable for PENN and Barstool, however, apparently had no better reason for doing so than personal vindictiveness.
Portnoy made the best of the situation, and good for him.
Still, it is not clear how we can reconcile such vast and arbitrary regulatory power with freedom and self-government.
In fact, the outcome in Portnoy’s case should remind us of the flawed reasoning that saddled us with regulatory commissions in the first place. It is an old story.
After the Civil War, railroads emerged as America’s first corporate juggernaut. The question of how to prevent these new behemoths from running roughshod over smaller businesses and acquiring undue influence in government occupied many of the era’s finest minds.
For instance, in 1871 Charles Francis Adams, Jr.–grandson of President John Quincy Adams and great-grandson of the Founding Father, President John Adams–published an essay entitled, “The Government and the Railroad Corporations,” which appears in a collection called “Chapters of Erie.”
Adams argued, in short, that large corporations created new circumstances that existing governments could not manage. Corporate interests easily corrupted and manipulated elected legislators. In any case, legislatures lacked experts who understood how each new industry worked.
The solution, according to Adams, lay in the creation of special tribunals — regulatory commissions. These tribunals would consist of people who had extensive knowledge of an industry and thus knew how it should operate. According to this theory, regulation by experts would produce efficiency and result in fairness.
But here arises the problem. If corporations can corrupt a legislature, why can they not corrupt a regulatory commission? Adams anticipated this objection, and his answer is most instructive.
“They may do so,” Adams wrote of the corporations’ capacity to corrupt the commissions, “but somewhere and at some point, put on all the checks and balances that human ingenuity can devise, we must come back and rely on human honesty at last.”
And there it is. We must come back and rely on human honesty at last.
Adams believed human honesty more likely to manifest on small regulatory commissions than in large elected legislatures.
The problem, of course, is that those commissions and those legislatures are staffed by human beings. Thus, human honesty cannot be more likely to manifest in one or the other place. Human vices most certainly will infect both.
Indeed, Adams’ own words undermine the rationale for a sprawling regulatory bureaucracy. Impose “all the checks and balances that human ingenuity can devise,” he wrote, and you still cannot do without honesty.
Circumstances might have changed since 1871, but human nature has not.
If you wonder about the likelihood of “human honesty” prevailing among modern regulators, ask Portnoy.