But Redbox is back. He built his own streaming operation. And the company’s stock is inexplicably one of the hottest on Wall Street, even though netflix (NFLX) dropped.
Shares of Redbox are up more than 20% this year, around 55% last month and nearly 200% in the past three months. This contrasts sharply with the 70% drop in Netflix, the worst stock in the S&P 500. disney (SAY)which has its own vaunted Disney+ streaming service, is down 40%, making it the biggest dog in the Dow Jones.
Other media companies offering streaming services, including Paramount Global, owner of Peacock Comcast (CMCSA) and CNN parent company Warner Bros. Discovery, which owns both HBO Max and Discovery+, also fell sharply in 2022.
Now, there are concerns that there are too many streamers chasing too few customers. Apple (AAPL) and Amazon (AMZN) also have streaming services. Disney also owns Hulu. And consumers could cut non-essential monthly subscriptions as recession fears grow.
So why is Redbox thriving? It’s a little complicated.
Redbox went public through a merger with a special purpose acquisition company (SPAC) in a blank check in October. The company was previously owned by the private equity giant Global Apollo Management (APO)which privatized Redbox’s parent company, Outerwall, in 2016. Outerwall also owned change-counting kiosk Coinstar, another retail relic.
Redbox is now planning to merge again, this time with the oddly-named video-on-demand media company Chicken soup for the soul (CSSE), the owner of the Crackle streaming service. Chicken Soup for the Soul bought Crackle from Sony in 2020.
But Redbox has also been the target of short sellers, investors (especially hedge funds) who bet that a stock will go down. More than 30% of the company’s available shares were held short at the end of May, a very significant amount.
And it’s interest in shorts, oddly enough, that may help boost Redbox’s stock.
It looks like Redbox has become a crowd favorite of Reddit meme stocks, those investors who helped boost GameStop (EMG), CMA (CMA) and, more recently, the bankrupt makeup giant Revlon (ROUND).
A quick look at the RDBX subreddit shows that the company is getting support there from individual investors buying the stock in order to “tighten” the shorts.
When a heavily shorted security rises, it inflicts more pain on short sellers. In effect, short sellers borrow shares and then sell them back in the hope of buying them back at a lower price before returning them. They pocket the difference as a profit. But if the price goes up, the shorts can lose a lot of money.
Some Reddit fans are predicting extremely high prices for Redbox. There’s even the now obligatory reference to Redbox as MOASS –— Mother of All Short Squeezes. (This same acronym has also been used to tout GameStop and AMC.)
The problem with short compressions is that they rarely last long. Redbox is quickly losing momentum.
The stock fell more than 10% on Thursday to around $9 and is now down about 40% from its recent high of just under $15 per share in mid-June. The Redbox squeeze may have been fun while it lasted, but make no mistake: the company isn’t the next Netflix or Disney.
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