Redbox Stock Jumps 25% in Value Following Share Offerings

Redbox Entertainment’s stock June 8 jumped 20% to $10.31 per share in pre-market trading — the day after closing up 25% at $8.55 per share.

The legacy kiosk disc rental service is set to be acquired by Chicken Soup for the Soul Entertainment, owner/operator of the ad-supported Crackle+ streaming platform, in an all-stock transaction valued at $375 million. The company is transitioning from a packaged-media focus to digital distribution, including ad-supported and transactional VOD, as well as free ad-supported streaming television, or FAST.

The company June 3 offered more than 60 million shares of Class A common stock in three separate purchase warrants for 6 million, 10.7 million and 32.7 million shares, respectively. The warrants are apparently fodder for “meme” investors eager to jump on the bandwagon of a company whose shares are priced low and easily prone to roller coaster shifts in valuation.

Subscribe HERE to the FREE Media Play News Daily Newsletter!

“Meme investors think the company is worth nearly $1 billion ($500 million of equity and $400 million of debt) and are baffled why a money-losing company with … zero cash would sell for close to zero,” Michael Pachter, media analyst with Wedbush Securities in Los Angeles, said in an email.

Pachter believes the initial 6 million shares for sale allows warrant holders to convert and sell at the market rate, and that Redbox doesn’t get any of those proceeds, other than a conversion of existing warrants.

“The stock might be up on that, but if my reading is correct, the meme traders are making a huge mistake,” he said.

Leave a Reply

Your email address will not be published.

five − 3 =

This site uses Akismet to reduce spam. Learn how your comment data is processed.