Short Selling

Redbox gets a short squeeze thanks to Investors but how long will the surge last?

The LED and remote are on the right and the logo of Redbox Entertainment Inc. is displayed on the left against the white background.

Redbox Entertainment Inc (RDBX: US) is an American video rental company that specializes in kiosks selling DVDs for renting or purchasing. Additionally, the company also produces and distributes movies under its label. With a current M Cap of approx. $97.3 million, the company has been suffering under the weight of streaming platforms, which is now a billion-dollar industry. 

In 2021, the company reportedly lost $140 million and later cut 150 jobs in Apr '22. More recently, unsurprisingly, the stock plummeted in 2021. Recently, the stock has gathered its strength once more thanks to the company’s newest investors. But short sellers are still surrounding it as well.

Short Squeeze

RDBX was once valued at $17.93 on November 4, 2021. But the price fell, and closed at $7.45 on the first trading day of 2022. The share price continued to dive and jostled up and down until Apr’22, after which it began a slow and steady rise.

The stock’s closing price has risen by almost 91.14% in the past five days. As of May 27, RDBX is valued at $7.71 per share.

On May 26, the company’s short interest rate was 20.73%. Since the start of the year. Since November 08, the company’s utilization rate has been at a record high. It’s been at a full 100% before sliding down a bit, and then coming back to a full 100%. The number of shares on loan has fallen considerably in May; at present the total number is 2,615,964.

Investors come to the Rescue

Redbox Entertainment went public in Oct’21, via a SPAC deal with Seaport Global. Even though the concept of DVD-vending machines which users could rent or purchase was unique, it was quickly disrupted by the arrival of streaming services, led by Netflix. Eventually, it was the COVID-19 which further pushed down on the company. 

Earlier this month, Chicken Soup for the Soul Entertainment announced its upcoming acquisition of Redbox. The objective is to create an independent, direct-to-consumer media platform as well as an ad-supported streaming platform. 

Following this, a May 25th headline stated that Redbox had obtained rights to distribute an upcoming historical drama film, Come Out Fighting, based on actual events in the Second World War. 

Despite the obvious short squeeze, there is a question of hope for the video-rental company. Especially considering that we now live in a world where people turn to the internet to watch movies instead of looking for video-rental stores or kiosks, like Redbox.

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