Don’t bet on Barstool in Michigan just yet

Penn Gaming has been applauded for its strategy of buying Barstool for its content, and therefore spending fewer dollars to acquire customers like its competition.

But the data in Michigan, which it entered on Day 1 of legalized mobile sports betting (Jan. 22), might lead investors to question that strategy.

Barstool made Michigan its second state — after Pennsylvania — and got off to a fast start. In its opening weekend, it took in $13.7 million in handle and for the 10 days in January had a 23.9 percent share of the market.

Fast forward to the May numbers for the state and the Barstool had a handle of $4.4 million more than those 10 days in January ($18.1 million). Its market share has dropped from 23.9 percent to 13.3 percent in February, 11 percent in March, 9.8 percent in April to 7.7 percent in May.

Three competitors, FanDuel (30 percent), DraftKings (28 percent) and BetMGM (21.7 percent) make up almost 80 percent of the market.

“DraftKings and FanDuel are customer acquisition platforms that operate as a sportsbook,” said Jed Kelly, executive director of equity research in the digital sports entertainment space for Oppenheimer & Co. “They are very good at doing this.”

Attempts to reach an official with Penn Gaming were unsuccessful.

Neither FanDuel nor DraftKings are profitable so the question will be how long they will have to pay to acquire customers while lowering churn.

Penn Gaming shares closed down 2.8 percent on Tuesday to 78.57, down 2.3 percent year to date against the NASDAQ, which is up more than 10 percent. The stock hit a high of $130.47 on March 12.

Barstool Sportsbook currently operates in Michigan, Pennsylvania, Illinois and Indiana.