But Redbox is back. He built his own stream operation
. And the company’s stock is, inexplicably, one of the hottest on Wall Street, even if Netflix (NFLKS)
are up more than 20% this year, about 55% last month and almost 200% in the past three months. This is in stark contrast to the 70% drop in Netflix, the worst stock in the world. S&P 500
. Disney (DIS)
who has his own vaunted Disney+ streaming service, fell 40%, making him the biggest dog on the market. Doe
There are now concerns that too many streamers are chasing too few customers. Apple (AAPL)
as well as Amazon (AMZN)
there are also streaming services. Disney also owns Hulu. And consumers may be cutting back on non-essential monthly subscriptions as recession fears rise.
So why is Redbox thriving? It’s a little tricky.
In October, Redbox went public through a merger with a Specialty Blank Check Acquisition Company (SPAC). The company was formerly owned by the private equity giant Apollo Global Management (APO)
which privatized Redbox’s parent company Outerwall in 2016. kiosk for counting change Coinstar,
another retail relic.
Now Redbox is planning to team up again, this time with a media company with the oddly named video-on-demand. Chicken soup for the soul (CSSE)
, owner of the streaming service Crackle. Chicken Soup for the Soul Bought Crackle from Sony
But Redbox was also the target of short sellers, investors (especially hedge funds) who bet that stocks would fall. As of the end of May, more than 30% of the company’s outstanding shares were in a short position, which is a very large amount.
And, oddly enough, interest from the shorts could help boost Redbox stock.
It seems that Redbox has become a favorite of the Reddit meme crowd, those investors who helped increase game stop (GME)
, AMS (AMS)
and the recently bankrupt cosmetics giant Revlon (REV)
A quick look at RDBX subreddit
shows that here the company receives support from individual investors who buy shares in order to “squeeze out” short positions.
When strongly short stocks rise, it causes more pain for short sellers. This is because short sellers borrow shares and then sell them in the hope of buying them back at a lower price before returning them. They appropriate the difference as profit. But if the price goes up, shorts can lose a lot of money.
Some fans on Reddit are predicting very high prices for Redbox. There is even a now obligatory reference to Redbox as MOASS — Mother of All Short Squeezes. (The same abbreviation was used for GameStop and AMC ads.)
The problem with short contractions is that they rarely last long. Now Redbox is rapidly losing momentum.
Shares fell over 10% on Thursday to around $9 and are now down about 40% from a recent high of just under $15 a share in mid-June. The Redbox squeeze may have been fun while it lasted, but make no mistake: the company is not the next Netflix or Disney.