Why Is Redbox (RDBX) Stock Up Again Today?

  • Today, shares of Redbox Entertainment (RDBX) have surged more than 35%.
  • This brings the weekly returns for this stock to more than 100%.
  • Additionally, this means the company is trading at a substantial premium to its takeover value.
RDBX stock - Why Is Redbox (RDBX) Stock Up Again Today?

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One of the more interesting movers in today’s bloodbath of a market is Redbox Entertainment (NASDAQ:RDBX). Today, shares of RDBX stock have surged more than 35%, continuing this week’s impressive price movements. On a week-to-date basis, Redbox is now trading at more than double where this stock came into the week.

Given the impressively bearish macro environment, this move is quite incredible. Today, the market has continued to sell off on news that inflation has not peaked. May’s CPI number came in at 8.6%, making a new high not seen since 1981. Many are calling for inflation in the 9%-10% range this summer, should gas prices remain high.

For valuations of most tech-related and growth-oriented stocks, this isn’t good. Companies like Redbox with business models that may be, shall we say, extremely speculative, even more so. That said, this company is still getting acquired by Chicken Soup for the Soul Entertainment (NASDAQ:CSSE) for $375 million. Today, the company’s market capitalization just hit $580 million.

Let’s dive into what’s driving this incredible move in Redbox today.

Why Is RDBX Stock Continuing to Climb?

When an acquisition is announced and approved, as it has been in the case of this upcoming $375 million takeover, typically the company being acquired trades right around its acquisition price. Any sort of deviation (discount or premium) to this price is usually an indication the deal might not fall through (discount) or another bidder may show up (premium).

However, that doesn’t seem to be the case here. Rather, it appears the rapid rise in RDBX stock is the result of short-squeeze mania. Once again, retail investors are finding names to pile into for quick wins. The latest target is beaten-down DVD rental kiosk company Redbox.

Overall, this rally doesn’t appear to be sustainable. In fact, anyone buying at these levels is probably going to be hurt.

I’m not buying this move, and personally, I think RDBX stock could be one of the more dangerous names to play in this space. That said, investors always play at their own risk. That’s the fun of investing.

On the date of publication, Chris MacDonald 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.

Chris MacDonald’s love for investing led him to pursue an MBA in Finance and take on a number of management roles in corporate finance and venture capital over the past 15 years. His experience as a financial analyst in the past, coupled with his fervor for finding undervalued growth opportunities, contribute to his conservative, long-term investing perspective.


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