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.