Why Redbox Entertainment shares plunged 51% today
Shares of Redbox Entertainment (NASDAQ: RDBX) fell 51.2% in trading on Wednesday after warning that its business was in trouble. Shares cratered early in the day and are down 47.8% as of 3 p.m. ET.
Redbox filed an 8-K with the Security and Exchange Commission (SEC) which said the company’s financial results were hit harder than expected by the lack of new movies in 2021. The pandemic has pushed back many releases in theaters and pushed some to streaming services immediately, negating the need to rent movies from Redbox. The company responded by increasing marketing spending, which did not reverse the trend.
Although the numbers weren’t announced, two red flags alerted investors. The first was the fact that the company borrowed all of its remaining revolving credit facility on January 28, 2022; the second red flag was the statement that it “evaluates a variety of strategic alternatives”. This is something investors don’t like to hear and a bad sign for Redbox.
Investors have to wonder if Redbox can survive in the long term. As more content moved to streaming, the physical discs that were a feature of Redbox became less important and the company failed to find traction in the on-demand sector. It’s not a stock I’m buying on today’s decline, and I wouldn’t be surprised if the stock continues to fall from here.
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