Redbox R/shortsqueeze rental box location

What is Redbox Stock?

Do you remember years ago when you would go to the mall or a grocery store and see a Redbox video rental machine? Well, it’s 2022 and Redbox is still around and apparently still going strong. Redbox (NASDAQ:RDBX) was founded in 2002 and still operates around 40,000 rental kiosks around the country. While the company primarily dealt with Blu Ray and DVD movie rentals, it briefly rented out video games as well. Redbox offers a free streaming service called Redbox Live which has unique movie and television show offerings. 

Redbox went public in 2021 via a SPAC merger with Seaport Global Acquisition. The stock debuted on Wall Street on October 25, 2021 to a fairly poor performance. In fact, Redbox did so poorly as a stock that it was acquired in May of 2022 in one of the more bizarre mergers. The company is being acquired by Chicken Soup for the Soul Entertainment (NASDAQ:CSSE). 

Did Redbox Stock Short Squeeze?

Redbox had such a lackluster performance as a publicly traded company that it became a prime target for short sellers. Redbox amassed a massive short interest, and as of June 16th still had 125% of its float in short positions. Does this sound familiar? 

Between the days of June 9th and 10th, RDBX surged by more than 60% in what was two of the most bearish sessions of the year. This downturn came following the release of the May CPI report which showed that inflation was at a 40-year high. On June 13th, the S&P 500 fell by 3.88% and the NASDAQ fell by 4.68%. Shares of Redbox soared higher by 15.68% on a day where nearly every stock in the S&P 500 was well in the red. On June 14th, shares of RDBX came full circle and tumbled by 34%, erasing most of its gains from the squeeze.

Redbox’s short interest caught the attention of social media traders, as discussion of Redbox began to trend in mid-May. Sites like Chatterquant have been alerting its users of increased Redbox mentions on social media since the stock had bottomed at around $2.00. Here is a visual of the increase in Redbox’s popularity which coincided with levels of short interest rising:


Why Did Exchanges Turn off Options Buying for Redbox?

History does not always repeat itself, but it often rhymes. Remember back to 2021 when brokerages like Robinhood turned off the ability to buy options for GameStop (NYSE:GME) and AMC (NYSE:AMC)? Well, on June 16th, several major brokerage firms turned off the ability to buy options contracts for Redbox. This time not only was Robinhood removing the Buy button for options, but TD Ameritrade too. Take a look at this email from TD Ameritrade customer support posted in the r/ShortSqueeze on Reddit. 

TD Ameritrade Client Services

Source: r/Shortsqueeze u/AMCto500k

TDAmeritrade claims that the brokerage itself did not have enough shares to cover options trading for the stock. Legitimate reason or more market manipulation? Only time will tell. 

What Will Happen to Redbox Stock?

The short interest remains high and the closing of option buying by brokerage will only prove to light a fire under retail traders. It remains to be seen if the stock will see another squeeze like it did in June. Given the response from TDAmeritrade, it doesn’t seem like options will be opened back up for the time being. Is Redbox headed for another short squeeze? It’s also somewhat of a ticking time bomb as it is set to be acquired in the second half of 2022. Could Chicken Soup for the Soul Entertainment be another short squeeze candidate? It currently has a 24.91% short interest according to Fintel, so it certainly has potential. 

Given Robinhood’s track record with these things, don’t expect the platform to help out retail traders. When TDAmeritrade closed option buying it was a little more surprising. Keep an eye on RDBX stock because things could start to get interesting over the next few weeks! 

By Mike