shares of redbox (RDBX 18.76%,, a physical and digital content rental service, soared up to 23% in the first few minutes of trading on Monday. As of 12:30 pm, the stock was still up 17.4%. This type of drama, however, is hardly unusual for Redbox, which has seemingly caught on in the meme stock craze.
If you’ve been paying attention to Wall Street for more than a few years, you know that when investor sentiment begins to dominate the action surrounding a particular stock, it can lead to unusual results in the short run. . In the long term, the hard facts usually win out. This is why the case of Redbox is so interesting. The company has agreed to be acquired by chicken Soup for the Soul (CSSE) 2.17%,, If all goes according to plan, Redbox shareholders will receive 0.087 shares of Chicken Soup for the Soul for each share of Redbox they own.
Chicken Soup for the Soul was trading at $9.44 a share as of 12:30 p.m. Monday, against its offering price for Redbox at $0.82 a share. Yet Redbox stock is changing hands at more than $5 per share, with Monday’s gain alone almost as big as the full buy bid. It’s not logical, and it won’t until a better proposal comes along. But as of now, no such bid appears to have worked, and the stipulation is that there is a serious level of downside risk if the current deal goes through.
Earlier Monday, Redbox’s name joined the list of Top Short Squeeze Candidates for August. Maybe that’s the reason for early Monday moving forward, but that doesn’t change the big picture here. Redbox is trading well above the takeover offer, though there’s no specific reason to believe the deal will be turned around in any way. At this point, buying Redbox is little more than a gamble, and most investors should probably avoid it. Too many big companies are on sale right now to be bothered by such risky positions in this bear market.