Redbox Stock Prices Surges, Possibly Threatening the Chicken Soup for the Soul Acquisition

Driven by social media investors and internet chatter, shares of Redbox Entertainment exploded June 13 in midday trading, surging more than 22% to $18.20 per share as day traders swapped more than 40 million shares — double the peak daily tally.

Similar to the fuss made a few years ago when social media investors sent shares of GameStop and AMC Theatres on wild rollercoaster valuations, scuttlebutt about Redbox on the Reddit WallStreetBets investing forum reportedly surged 400% in the past 24 hours.

Morningstar reported that short interest in Redbox shares reached almost 38% of the float, or the total number of shares that are available for public investors to buy and sell.

The buzz could impact Redbox’s acquisition by Chicken Soup for the Soul Entertainment, which had agreed to buy the legacy kiosk disc vendor based on a valuation of $375 million — not the current $700+ million value.

Regardless, Michael Pachter, media analyst with Wedbush Securities in Los Angeles, contends the entire scenario defies logic. He believes meme investors think that Redbox is worth nearly $1 billion, which includes debt.

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

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Redbox Stock on Wild Run Day After Going Public

Redbox, the venerable kiosk disc rental company transitioning to digital entertainment distribution, Oct. 26 saw its shares up more than 96% at $23.39 per share in early trading — the day after going public on the Nasdaq exchange. Shares fell minutes later to around $19 and then $17 after opening at $11.75 per share, with trading volume above 7.6 million shares and climbing.

Redbox Entertainment Inc. is the new corporate identity following the company’s previously-announced merger with Seaport Global Acquisition Corp., a special purpose acquisition company, or SPAC.

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At launch, Redbox had more than 45 million shares outstanding, including a majority held by former owner Apollo Capital Management, which acquired the disc vendor from Outerwall in 2016 for $1.6 billion.

With Ringing of the Bell, Redbox Officially a Public Company

CEO Galen Smith travelled to New York’s famed Times Square to ring the opening bell on the Nasdaq  stock exchange Monday (Oct. 25) morning, marking Redbox’s official debut as a publicly traded company.

“It was amazing, it was a huge highlight,” Smith told Media Play News in an interview shortly after the ceremony. “This is something I’ve wanted to do for years. I started working on taking Redbox public back when I was a banker in 2008, so to be actually here and doing this feels like a truly incredible day.”

Rather than going the long and tedious IPO route, Redbox became Redbox Entertainment Inc. — with its common stock and warrants trading under the ticker symbols “RDBX” and “RDBXW,” respectively — through a merger with Seaport Global Acquisition Corp., a publicly traded special purpose acquisition company.

“We felt it was going to be the most efficient way to bring the company to market,” Smith said. “Our business is in transition, moving from physical only to multi-channel and multi-platform, so it allowed us to have a platform to really tell our story.”

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The story, of course, is a digital transformation to bulk up Redbox’s digital offerings — digital movie sales and rentals; free live TV, both on demand and ad-supported; and, down the road, selling subscriptions to streaming services — while using the company’s more than 40,000 disc-rental kiosks as a marketing tool to further facilitate the consumer transition from physical to digital.

“We have this incredible business with a very loyal customer base that absolutely loves movies,” Smith said. “They still love renting movies at our kiosks, but as we know consumers are shifting to digital, and we want to create an opportunity for them to make it easy by having all those opportunities in one place — free live TV, TVOD, and on demand — and then as part of this transition we’re going through we also will be adding subscription channels.

“And then you have this single plane of glass, a single window, with single billing, that makes it incredibly easy for consumers to access all of this entertainment. And having this incredible billboard through our kiosks creates an amazing opportunity that really allows us to serve our customer base.”

See more photos of Redbox’s Nasdaq ceremony

Redbox’s digital transformation, ambitious as it might be, is fully on track, Smith said. “We’re making a lot of progress,” he said. “We’ve set some important goals and objectives, and we keep running and chasing after that. We’re pleased with the momentum, but we think there’s a huge opportunity and we want to seize that opportunity. We still have a long way to go.”

Redbox’s over-arching goal, Smith said, is to create a one-stop destination for entertainment. “And we’re going to get there by constantly bringing in more titles for ad-supported free live TV, as well as more channels — we’d love to get 200 or so channels; continuing to expand the functionality of TVOD; and, with subscriptions, it’s really important for us to get those deals done and make that content available to consumers.”

Through the business combination with Seaport Global, Smith said, Redbox raised nearly $90 million in cash. “Part of it went to pay down debt, and the other part we’re investing in the business, in four key areas,” he said. “First, we’re building up our channels platform. Second, we’re leaning into advertising. Right now we have this really creative program with Roku selling discounted bundles for Redbox digital. You get that when you buy a Roku streaming device at Walmart. Third, we’re going to license more content for our ad-supported service, both on demand and free live TV. And then we’re going to continue to build up Redbox Entertainment, the titles we’ve been distributing — we’re going to bring in more and more of those.”


Trans World Entertainment Switching Nasdaq Markets

As expected, fiscally-challenged Trans World Entertainment Corp. is taking its stock from the Nasdaq Global Market to the Nasdaq Capital Market, effective July 18.

The corporate parent to home entertainment retailer For Your Entertainment (f.y.e.) made the switch to avoid exceeding a 180-day grace period granted by Nasdaq to bring its stock above the minimum $1-per-share threshold.

Trans World, which is affecting a 1-for-20 shares reverse stock split on Aug. 15, now has another 180-period until Jan. 13, 2020 to bring its share price above the $1 minimum valuation.

The reverse stock split is primarily intended to bring TWEC into compliance with the minimum average closing share price requirement for maintaining its listing on the Nasdaq Capital Market. The company’s common stock will continue to trade under the symbol “TWMC”.

The split will reduce the number of shares of outstanding common stock from approximately 36,258,839 million shares to approximately 1,812,941 million shares.

TWEC shares closed July 16 at 28 cents per share. The company has a market capitalization of just $10.3 million.

MoviePass Lost More Money Than Originally Reported

In another blow to fiscally-challenged theatrical ticket subscription service MoviePass, parent Helios and Matheson Analytics March 12 issued a revised financial statement revealing the service lost millions more than originally reported.

HMNY said its revised third-quarter (ended Sept. 30, 2018) net loss topped $146.6 million — nearly 7% more than a net loss of $137 million originally reported. For nine months of the fiscal year, HMNY lost $256.3 million, 3.8% more than a loss of $246.7 million.

HMNY attributed the error to overstatement of subscription revenue, including $700,000 of revenue from terminated MoviePass subscriptions by Costco; false recognition of about $5.9 million of revenue from certain suspended subscriptions that had not yet been consented to by subscribers.

The company also identified a non-cash error related to the accounting of derivative securities, which resulted in an understatement of net loss of approximately $2.9 million. HMNY said the error underscored a “material weakness” relating to subscription management.

CEO Ted Farnsworth and CFO Stuart Benson said measures have been taken to avoid future accounting issues, including implementation of software upgrades to provide “real-time” information for managing and accounting for subscriptions, including subscriptions that are terminated or in a suspended state.

“Members of the company’s management have discussed the matters with Rosenberg Rich Baker Berman, P.A., [HMNY’s] accounting firm,” Benson wrote in the filing.

HMNY, which had its stock delisted by Nasdaq for failing to meet the $1 minimum share value, has struggled to sustain the MoviePass business  model that enabled subscribers daily access to a theatrical screening for $9.95 monthly fee.


Report: MoviePass Parent Expected to Delist

With its stock flatlining at a penny per share, Helios & Matheson Analytics — parent of fiscally-challenged theatrical ticket service MoviePass — is expected to delist from Nasdaq.

Bloomberg, citing market data, said HMNY could delist as early as the end of the business day on Feb. 12 — resuming trading as an over-the-counter stock.

HMNY spun-off MoviePass in January in an attempt to jumpstart investor confidence after the pioneering $9.95 monthly over-the-top ticket service resonated with consumers at the expense of a stable business model.

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Successive fiscal quarters generated fiscal losses in the hundreds of millions, compounded by the launch of a competing ticket service from AMC Theatres that resulted in a free-falling HMNY stock.

While MoviePass Films continues to produce low-budget movies, MoviePass took another PR hit when Variety reported that a senior executive recently hired to help turn the service around had been charged in 2010 with stealing thousands of dollars from a previous employer.

Trans World Entertainment Corp. Given Nasdaq Delisting Warning

Trans World Entertainment Corp., parent of home entertainment retailer f.y.e. (For Your Entertainment), Jan. 17 disclosed it has been put on notice by Nasdaq regarding its stock not meeting the $1 minimum price-per-share valuation for publicly-traded companies.

The retailer, whose stock is trading at 61 cents per share, has until July 15 to elevate the stock price to the minimum amount.

If the company does not regain compliance during the initial period, it may be eligible for additional time to regain compliance. If TWEC is not eligible, its expects that Nasdaq will provide written notice that the company’s common stock will be subject to delisting.

MoviePass Parent Sells Hundreds of Millions in Common Stock for Pennies

Fiscally-challenged Helios and Matheson Analytics, parent of theatrical ticket subscription service MoviePass, Jan. 16 announced it has entered into definitive agreements with certain institutional investors for the purchase of 333,333,334 common units for gross proceeds of about $5.4 million.

Each unit includes one share of common stock, one warrant to purchase one share of common stock at a price of 1.63 pennies per share, one warrant to purchase another share of common stock at the same price, and one warrant to purchase one share of common stock at $1 per share.

The potential gross proceeds from the warrants, if fully exercised on a cash basis, will be about $344.2 million.

HMNY said it would use the $5.4 million for working capital purposes; to redeem about $1.2 million of an outstanding debt offering; and to pay certain fees due to the placement agent and other transaction expenses.

Indeed, with its stock worth less than 2 cents per share, HMNY is in danger of being delisted by Nasdaq for failing to meet the minimum $1 per share threshold. The trading board has given HMNY until April to meet the minimum.



F.Y.E. Parent Back in Nasdaq Compliance

Trans World Entertainment Corp., parent of mall-based home entertainment retailer f.y.e. (For Your Entertainment), said it has been notified by Nasdaq that its stock is again in compliance with the trading board.

At issue was TWMC’s ability to meet Nasdaq’s minimum $1-per-share stock valuation. Failure to do so can resort to delisting, which can negatively impact a company’s ability to generate funding, among other issues.

On Nov. 16, TWMC said it received written notice from Nasdaq stating that the company’s common stock had a closing bid price of at least $1 per share for 10 consecutive business days (from Nov. 2 to 15).

In a statement, the company said it had regained compliance with Nasdaq Listing Rule 5450(a)(1) and “the matter is now closed.”

TWMC shares closed Nov. 20 at $1.02 per share