PENN Entertainment stock jumps 20% after striking $2 billion sports-betting deal with ESPN

• PENN Entertainment stock spiked 20% on Wednesday after announcing a $2 billion deal with ESPN.
• The company will partner with ESPN to launch ESPN Bets, a new US-based sports-betting platform.

Penn Entertainment stock spiked on Wednesday after the company struck a $2 billion sports-betting deal with ESPN.

Shares jumped 20% in early on Wednesday to trade at $28.90 a share after the casino operator announced a new partnership with the cable network to launch ESPN Bet, a US-based sports-betting platform.

The new platform is a rebrand of Barstool Sportsbook and is expected to launch this fall across 16 states where Penn already has a presence in the sports-betting space. The company will pay up $1.5 billion to ESPN over the following decade, while giving ESPN warrants worth $500 million to purchase 31.8 million shares of Penn stock.

Meanwhile, Penn sold Barstool back to its founder David Portnoy at no upfront cost, with Portnoy agreeing to noncompete arrangements and to give Penn 50% of the proceeds in the event he resells Barstool to another owner.

"The strategy here is simple: to give fans what they've been requesting and expecting from ESPN," ESPN chairman Jimmy Pitaro said in a statement. "Penn Entertainment is the perfect partner to build an unmatched user experience for sports betting."

The new platform marks ESPN's first major sports-betting deal, and it comes as the Walt Disney Company, ESPN's parent, has struggled to maintain its profits in the entertainment space. In its fourth quarter of 2022, the company missed its earnings by a wide margin, causing the stock to extend its steep decline since mid-2021.

Disney shares rose 1% on Wednesday to trade at $88.13, down 55% from its all-time-high price of $197.16. The company is expected to report earnings for its third quarter after the closing bell on Wednesday.