Redbox Entertainment (NASDAQ:RDBX) stock is doubling in late morning trading today. The rally in RDBX stock is likely being driven by many investors’ belief that a short squeeze of the name will continue. That speculation was sparked by Chicken Soup for the Soul Entertainment’s (NASDAQ:CSSE) acquisition of Redbox.
The deal was announced on May 11, and RDBX stock has been very volatile since. The stock changed hands for more than $15 on June 13 before tumbling to around $3 last week. At the beginning of the year, the shares were worth about $7.50.
What’s Happening With RDBX Stock
Chicken Soup said it would provide Redbox shareholders with 0.087 of a share of class A CSSE common stock for every share of RDBX stock they own. So far today, Chicken Soup has climbed by more than 6% to about $9.66 per share.
Chicken Soup is a conglomerate that owns several companies, including streaming service Crackle. It describes the subsidiary and its other, similar services as “advertising-supported video-on-demand (AVOD) networks.” Meanwhile, Redbox owns and operates kiosks from which consumers can rent movies. Additionally, the company has a number of digital streaming channels.
“The combination of Chicken Soup for the Soul Entertainment and Redbox will create a leading independent, integrated direct-to-consumer media platform delivering premium entertainment for value conscious consumers,” Chicken Soup stated in May.
It added that, in the wake of the deal, the combined company will own one of the top AVOD systems in the sector. It quoted a study that estimated “ad spending on connected TV platforms increased 57% from 2020 to 2021 and is expected to increase another 39% this year.”
‘A Goofy Meme Stock’
Opinions on Redbox vary, but one notable example is that of Seeking Alpha contributor Chris DeMuth Jr. In a June 29 column, he warned that “in the days and weeks ahead, [Redbox’s] stock price could do absolutely anything.” DeMuth labeled the name “a goofy meme stock” and stated he expects the transaction to close by September.
On the date of publication, Larry Ramer 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.