Redbox (NASDAQ:RDBX) stock is up 3% today in volatile trading as the video rental company appears to be caught in a short squeeze.
Today’s rise comes after RDBX stock climbed more than 35% in trading yesterday (April 25) despite the fact that the company announced that its CFO is stepping down.
While news of a senior executive departure is usually viewed negatively and results in a stock falling, Redbox shares are marching higher as retail investors execute a squeeze on the heavily shorted stock. Even with the recent gains, Redbox stock is down 75% over the past six months.
What Happened With RDBX Stock
In a statement, Redbox said that Kavita Suthar will step down from the CFO role on May 16. Ms. Suthar joined Redbox in 2015, became CFO in 2020, and helped the company go public in October 2021. Mitchell Cohen will serve as the interim CFO while the company searches for a permanent replacement. Ms. Suthar will remain involved with Redbox in an “advisory capacity” going forward, the company said in its statement.
Despite news of the management shake-up, RDBX stock jumped more than 30% yesterday and is climbing in early trading today. There has been no other relevant news from the company that would move its share price, suggesting that the stock might be caught in a short squeeze. Redbox specializes in DVD and Blu-ray rentals via automated kiosks placed in retail locations. Many investors and analysts see the company’s business model as outdated. As a result, the stock is heavily shorted.
Currently, more than 40% of the RDBX stock float is being sold short.
Why It Matters
Since going public last fall, shares of Redbox have steadily declined. The short interest in the shares indicates a high degree of pessimism related to the company and its stock. The announcement that the company’s CFO is departing is also negative news and should contribute to a further erosion of confidence in RDBX stock. That the shares are rising suggests that it is being targeted by retail investors.
While not as prominent as last year, short squeezes continue to occur as investors conspire to elevate the share price of a company. Investors thinking about buying RDBX stock should remember that the share price can fall as quickly as it has risen.
What’s Next for Redbox
Trading in RDBX stock is extremely volatile right now. While it is difficult to predict where the share price will move, there is currently no reason for it to be vaulting higher. Investors should be cautious with Redbox stock or risk getting burned in a short squeeze that is likely to end as quickly as it began.
On the date of publication, Joel Baglole did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
