Another once-prominent company may soon be obsolete. Chicken Soup for the Soup Entertainment (NASDAQ:CSSE) has officially filed for Chapter 11 bankruptcy protection as of yesterday, July 1. The entertainment company, named for the iconic book, had branched into areas beyond self-help, including owning DVD rental service Redbox. But after an extremely difficult trading year, CSSE stock has bled out almost all its value, falling more than 90%. Now, its race to the bottom is accelerating, as the company’s financial struggles have reached a breaking point, and there seem to be no other options available.
Does the bankruptcy filing mean that CSSE stock will soon cease to exist? Let’s take a closer look at this troubled company and assess what investors should be expecting in the near future.
What’s Happening With CSSE Stock
Granted, at 11 cents per share, CSSE stock doesn’t have much further to fall. But trading has been highly volatile today, with shares mostly trending downward as the market reacts to the bankruptcy protection filing. As of this writing, shares are down 3% for the day, and the stock looks poised to continue trending downward as further negative sentiment sets in.
There’s no denying that things look extremely bleak for this troubled company. According to The Wall Street Journal, Chicken Soup for the Soul Entertainment boasted a debt load of nearly $1 billion and that a group of lenders proved “unwilling to consent to potential refinancings.” When the company acquired Redbox in 2022, its debt burden increased by $360 million. But after the deal closed, things went from bad to worse as CSSE stock began to fall at a time when share prices were already low.
Redbox is a relic of a former era. The company, founded in 2002, gained a national presence at a time when Netflix’s (NASDAQ:NFLX) business model centered around shipping DVDs by mail. However, the physical DVD rental market hasn’t aged well, as its owner knows all too well. As the Los Angeles Times reports:
“While Netflix disrupted the film and television business by bringing streaming to the masses, Redbox struggled to pivot, despite various attempts to capture a more digitally savvy audience as the DVD business collapsed. By 2017, the U.S. market for cheap rentals from kiosks had collapsed to $1.27 billion in consumer spending, down by about a third compared with five years earlier, according to data from Digital Entertainment Group.”
Now Chicken Soup of the Soul’s decision to buy the company may be its downfall. Its long list of creditors includes Warner Bros. Home Entertainment and Sony Pictures as well as retail chains such as Walmart (NYSE:WMT), which host Redbox kiosks.
Why It Matters
It isn’t surprising that Chicken Soup for the Soul Entertainment would be on its way out after the type of year it’s had. Despite a meme stock surge in April 2024 that ended as quickly as it began, CSSE stock has seen no real momentum and has only inched toward the bottom.
Now, it seems that its gradual decline has finally picked up speed, as the company is out of options. For a company that built its brand around helping heal groups of people, CSSE hasn’t been able to heal its own business model.
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On the date of publication, Samuel O’Brient 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.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
