May 11, 2022
Redbox Entertainment shares may have fallen 35% in value May 11 since the legacy DVD kiosk vendor announced it would be acquired by Chicken Soup for the Soul Entertainment, operator of the Crackle Plus ad-supported streaming video service, for $375 million in stock.
But Redbox’s digital businesses faced an uncertain future without the fiscal lifeline thrown by Chicken Soup, according to Los Angeles-based Wedbush Securities media analyst Michael Pachter, who says the transaction values Redbox shares around 65 cents per share.
Redbox shares, which closed May 10 at $5.60 per share, are now trading at $3.58 in heavy trading.
Pachter believes that despite Crackle Plus being better established within the AVOD market, Redbox’s brand name carries more recognition among consumers. The analyst believes Chicken Soup will be able to meld the streaming service within Redbox TV, in addition to bringing greater resources to digital distribution in a market swamped with big-spending AVOD competitors such as Fox Corp.’s Tubi and Paramount Global’s Pluto TV.
“Redbox’s post-IPO performance did not inspire confidence for its long-term potential, and the company faced bankruptcy without a significant cash infusion,” Pachter wrote in a note. “Had [Chicken Soup] not stepped in… it is unclear how long Redbox would be able to fund its own digital expansion, which is key to its viability as a public company.”