What's up guys and welcome back to the
channel today I want to make a video
that I've been meaning to make for the
past few weeks. This is in response to a
lot of requests that I have gotten for
my thoughts on this but it is also a
response to a lot of negative comments
that I have got over the past two months.
so in this video I will be looking at
redbox ticker or RDBX. A stock that i
first mentioned on this channel and on
twitter at only three dollars that ran
up as high as eighteen dollars, that's a
five hundred percent gain (nasdaq:rdbx)
but as soon as I mentioned risks and the
people should do serious due diligence
an avalanche of negative comments came
my way now the stock is being hyped and
i do not believe that the hype is
justified any longer. When I first spoke
about this stock there was a big
opportunity but now I feel that there is
far more downside than possible upside
But: Can $RDBX stock skyrocket one more time?
this week? In this video I will look
at the catalyst that people are saying
will drive this stock and I will give
you my conclusion on just
How low I think this could drop over the coming
months? this video has taken a lot of
time and effort to prepare today so if
you appreciate the effort show your
support I may mean to get 300 likes on
this video but I do expect a lot of
dislikes too so if you find any value in
this video then help the channel by
liking and remember this is not
financial advice I am not a financial
advisor but if you do enjoy this content
then subscribe to the channel if you
haven't already done so let's start with
the very latest news that is driving
this stock and go from there. As of
tomorrow redbox stock will be added to
the russell 3000 and russell 2000 index
now i'm seeing a lot of comments about
this being a major catalyst for
rdbx stock and that this is a big deal
for the stock
joining the major indices always provide
a big boost for stocks that will
automatically be added to the
appropriate growth and value indexes
which brings great visibility within the
institutional investment community but
also trading volume
due to being on the index
so it is incredibly important to
understand why a stock gets added to
these indexes in the first place the
russell 3000 is made up of the 3 000
largest u.s companies representing about
98 of the entire market the russell 1000
index is met up with the top 1000 while
the russell 2000 is comprised of the
bottom 2 000 small cap companies
and these are determined by market
capitalization (#rdbx)
the reason that redbox stock is being
added to the russell 2000 and 3000
indexes is because of the company's
market capitalization
which puts it in the top 98 of stocks on
the market
the russell rebalances its index yearly
in the last week of june and red box was
not (nasdaq:rdbx)
on the index
prior to this because the company only
went public late last year
so this being talked about as a major
catalyst is simply not true unless of
course you want to say that 98 of the
market has the exact same catalyst
and saying that this will bring a
massive increase in volume is not true
either
perhaps for stocks that have a very low
trading volume this will bring an
increase but redbox has an average
trading volume of 21 million so this
will make very little difference overall
So, Will rdbx stock go up on monday?
because of this - No. this makes absolutely
no difference to redbox stock and anyone
saying that this will make a major
difference is simply using this to pump
the stock
my next point is very simple the main
story (#rdbx)
is that this stock will squeeze and when
the stock does it will be like the next
amc or gme
remember those short squeezes
gamestop was back in 2021
which went from just a few dollars to
over 400 dollars
and amc followed this a few months later
from just a few dollars again to over 70
dollars now I spoke all about the short
squeeze in my first redbox video back
last month and I originally called this
out on twitter when this stock was only
three dollars I want to point out why it
is so important to follow me on twitter
if you're not already doing so I think i
noticed a stock gathering a bit of
attention
and gaining a few percent on the day
as most of you know I have a full-time
job I don't have time to make videos
during the week but once I got a chance
to take a look closer at this I seen
that there was a huge possibility for a
quick profit to be made and after liking
what i've seen I tweeted about it as it
says here a very nice looking setup here
at tough built cut this goal on a red
box type of run
26 (nasdaq:rdbx)
up today and I would not be surprised to
see a 100 gain here in days and even
more in the very near future
and then what did we have this stock was
up 95 so I had to ask the question if
anyone jumped in on the stock yesterday
evening that is a 100 gain in less than
24 hours
if you've seen this yesterday and you
jumped in on this
drop a comment and let me know
but look at this this tweet was put in
front of just over 2 300 people of which
30 people read this tweet
and only four liked it
that is 99.8 percent of people missed
out on this play which is crazy
but this is a regular thing
i don't wait all day long in fact I only
tweet a few times a week if I have
something important to say or a new
video released
that's about it
but look here I tweeted about redbox
back in april when nobody was talking
about this stock either
and then not once but twice this made
huge gains
hitting over 15 earlier this month
again so many people missed out on this
so stop missing out
that's nearly a 400 gain from the time i
posted this
so start missing out this costs you
nothing it's completely free hit the
like button subscribe to the youtube
channel and follow me on twitter let's
make those gains together in the coming
months in fact redbox actually went as
high as 18
so the stock has now dropped nearly 50
percent but despite this job there is a
lot of people adamant that this stock
will squeeze
personally I think it's over for this
squeeze it has already happened and now
it's in its decline
but according to ortex data this is
still very much on
and so many people are clinging to this
but one thing that is needed for this
theory is volume and interest in the
stock
and this is something that has been
dropping for the past week the message
volume on stockwits has dropped from
over 70 000
to just over 17 000
the stock is no longer trending
or ranked among the top most active or
top most new watchers
even the rdbx subreddit has gone quiet
with talk of the russell inclusion being
the only real updates here now some will
say that this is the cam before it takes
off again but I think the squeeze has
already happened and now it's over
that is my opinion but look at the rdbx
stock price
this was less than 180 just a few months
ago and it spiked up to 18
that is incredible
that is a 1 000 gain for those who got
in early and the majority of them are
probably already gone
after all this stock was at one point
one of the most traded stocks in the
world with daily volume of around 200
million (nasdaq:rdbx)
on friday this had daily volume of just
5.5 million which leads me on to what is
next for rdbx shareholders and what will
happen to rdbx when the company is
acquired by chicken soup for the soul
redbox stockholders will receive a fixed
exchange ratio of
0.087 of a share of class a common stock
of chicken soup per red box share so
first of all let's think about this from
a logical point of view for every red
box share red box shareholders will
receive
0.087 of shares of chicken soup but that
means that shareholders will get one
share of csse stock for every 11.5
shares of $RDBX
REDBOX stock.
redbox stock is currently 9.75 so 11.5
shares of redbox has a value of just
over 112 dollars
and in return shareholders will receive
one css share for this
css stock is currently trading at 7.79
so this does not make sense at all for
redbox shareholders
but it actually gets far worse than this
so if this deal is so bad for
shareholders why would management even
consider agreeing to these terms now
this is something that I spoke about in
my previous video and I will look at the
financials in just a minute but as it
says here the risk of bankruptcy over
the next 12 months is very high and
investors should be concerned
now I feel this is somewhat of an
understatement of the risk of bankruptcy
this risk was not high it was pretty
much a certainty (#rdbx)
and that much was discussed in the going
concern disclosure made by management
in their recent annual report
so let's look at the red box report to
see exactly why management would agree
to such a deal for shareholders
this should help everyone to understand
the risks involved here the position
that the company is in and how the stock
has ended up being so heavily shorted in
the first place
looking at the company's balance sheet
we can see that they have total assets
of 378 million dollars and total
liabilities of 440 million this means
that red box is in negative equity to
the value of 62 million
to make matters worse long-term debt is
by far the largest liability while
goodwill is recorded as the biggest
asset to put this simply this is a
terrible balance sheet this coupled with
the fact that revenues have been
dropping dramatically year over year
down 66 percent from 800 million in 2019
down to 280 million in 2021 this has
made even worse because costs have not
even halved what was once a profitable
business is now a huge loss maker losses
of over 140 million dollars for 2021 and
we can see here in the notes to the
accounts just how bad things really are
in january
redbox borrowed the remaining
availability under its revolving credit
facility and on the 1st of april 2022
the company announced a reduction in
force of 150 employees and management
have highlighted the level of the
problems that they are facing there is
substantial doubt about our ability to
continue as a going concern and this
could materially impact our ability to
obtain capital financing and the value
of our common stock if we cannot
continue as a going concern our
stockholders would most likely lose all
or most of their investments in us so in
a way the deal makes sense for redbox
but how does it make sense for chicken
soup they are essentially absorbing a
high level of debt
in what feels like a massive user
acquisition deal and I still do not see
any good ending to this story i've
compiled this very simple spreadsheet
from both companies latest financial
data
as we can see here
chicken soup have a total of 270 million
dollars
in assets and total liabilities of 196
which gives chicken soup total equity of
just 73 million dollars assuming that
nothing was to change in the coming
months
we can see that by acquiring the assets
and liabilities of redbox the combined
company would have total assets of 632
million total liabilities of 660 million
meaning that the combined company would
actually have negative equity of 28
million dollars now this is a very
simple spreadsheet
using very simple data from the
company's latest financials but
personally I would be staying well clear
of this company if you believe the short
squeeze is still yet to happen
then go for it
but at red box stock current price being
close to 10 I feel that this could
eventually drop
around 80 before this merger takes place
so I will be staying well clear of this
stock
so guys before we wrap up the video what
do you think of redbox
will you be investing in this stock for
the short squeeze
or do you believe in the long term
potential drop a comment and let me know
what you think this company and if you
enjoyed my video
i do recognize that this will get a lot
of dislikes due to me talking about the
stock possibly dropping about 80 percent
but I would greatly appreciate if you
could smash the like button if you did
enjoy this video (#rdbx)
of course this is not financial advice i
am not a financial advisor and please
hit the subscribe button if you're new
to the channel or follow me on twitter
and i'll catch you in the next one