Why are Redbox Entertainment Shares Surging?

Redbox Entertainment (NASDAQ: RDBX) shares jumped 42.9% on May 2 to close at $8.53 but dropped over 9% in the extended trading hours, hinting at a possible short squeeze.

While there isn’t any specific reason for the huge price movement leading to two trading halts during early trading hours on Monday, the stock has indeed generated significant retail investor interest recently, especially after the company announced a new line of financing and the CFO transition last week.

Redbox is a leading entertainment company that gives consumers access to a large variety of content across digital and physical media. The company operates a rapidly growing digital streaming service and also operates its popular kiosks across the US at thousands of retail locations thereby giving consumers affordable access to the latest in entertainment.

New Financing

In an SEC filing on April 28, the company disclosed that it had received access to a line of credit worth $50 million. The share price jumped following the announcement as the new financing could be aimed at supporting the development of its streaming business. The company’s core DVD/Blu-ray rental kiosks business has been on a secular decline.

Per the SEC filing, Redbox entered into a Voting and Support Agreement with HPS Investment Partners to provide access to the additional capital through its previously announced credit agreement.

CFO Transition

Last week, Redbox also disclosed that its CFO Kavita Suthar, who led the company’s public listing in October 2021, is stepping down from her role effective May 16 for personal reasons.

Meanwhile, Mitchell Cohen will serve as the interim CFO. Cohen has served as Chief Operating Officer and Chief Financial Officer at several public and private companies.

Wall Street’s Take

Turning to Wall Street, the analyst consensus is also optimistic about Redbox, with a Strong Buy rating based on three Buys and one Hold. The average Redbox Entertainment stock forecast of $5.33 indicates a downside potential of 37.51%.

Investors Weigh in

Massive investor interest is reaffirmed through the TipRanks’ Stock Investors tool.

According to the tool, investors currently have a Very Positive stance on Redbox, with a whopping 39.9% of investors increasing their exposure to RDBX stock over the past 30 days. Further, over the past week, 11.2% of investors increased their exposure to RDBX stock.

Bottom-Line

Markedly, the shares have seen high volatility recently, almost doubling up over the past week and up over 277% over the past month.

However, over the past year, shares of the company are down 13.7% and have been volatile ranging between $1.61 and $27.22.

Investors should keep a close watch on the shares for any incremental positive news or new upcoming turn of events that could decide the future course of share price movement for this highly-volatile stock.

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