Redbox (NASDAQ:RDBX) stock is continuing to decline today after the company announced that it has received shareholder approval to merge with Chicken Soup for the Soul Entertainment (NASDAQ:CSSE). Redbox first announced this merger in May, valuing the company at around $335 million.
As part of the agreement, RDBX stock investors will receive 0.087 shares of CSSE stock for each share of RDBX stock they own. At current prices, shareholders would receive partial CSSE shares worth a little over $1 for each RDBX share. Currently, RDBX stock trades in the $2 range.
According to the latest data on July 15, Redbox carries a short interest as a percentage of float of 23.5%. In other words, 2.25 million shares are sold short, carrying a dollar volume of $9.83 million. It would only take 0.1 days to cover all the shares sold short. Furthermore, shares sold short declined by 18.5% from June.
In June, shares of RDBX stock traded as high as $18.20. But it isn’t exactly surprising to see that Redbox has since declined. As of Mar. 31, the company had $349.3 million in debt and only $9.8 million of cash on hand. The company admitted that it had “substantial doubt” about continuing operations if the merger deal did not go through.
Why Is RDBX Stock Down Today?
Redbox has over 38,000 DVD kiosks across the United States, going against the growing trend of video streaming. In the past, the company had tried to enter the streaming industry but it failed to gain traction. However, Chicken Soup already engages in streaming via Crackle and “other ad-supported streaming services,” per Barron’s. As a result, the merger will likely bring streaming synergies between the two companies.
Following the close of the deal, CSSE stock shareholders will own 76.3% of the new company and RDBX shareholders will own the remainder. The transaction is expected to close by the end of 2022.
With RDBX shareholders set to receive just over $1 per share, it makes sense why Redbox is down so much today. Shares will likely continue this decline. Still, the price of RDBX stock will be linked to CSSE until the merger closes. Any increase or decrease in CSSE stock will affect RDBX due to the terms of the merger.
On Penny Stocks and Low-Volume Stocks: With only the rarest exceptions, InvestorPlace does not publish commentary about companies that have a market cap of less than $100 million or trade less than 100,000 shares each day. That’s because these “penny stocks” are frequently the playground for scam artists and market manipulators. If we ever do publish commentary on a low-volume stock that may be affected by our commentary, we demand that InvestorPlace.com’s writers disclose this fact and warn readers of the risks.
Read More: Penny Stocks — How to Profit Without Getting Scammed
On the date of publication, Eddie Pan did not hold (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.
