The RDBX stock represents Redbox Entertainment Inc., a video entertainment company. In this article, we will find out about this stock’s history. We should first explore the company itself before diving into the RBDX stock. Similar to Blockbuster, this company primarily specializes in the rental of DVDs, Blu Rays and other similar products. It’s a company with its headquarters in Oakbrook Terrace, Illinois, USA.
The history behind the company is unusual. It originally began as part of a McDonald’s business expansion in Chicago. It eventually parted from McDonald’s after some years. The company even surpassed Blockbuster in the number of locations it had opened in the US. Success came very easily during the DVD peak in the 2000s as they rented at low prices. Its business model involved outdoor kiosks which allowed for easy access for customers to find the product they desired. It also was a cost-cutting measure as this model did not require a great number of employees. All of this added up to great initial success for the company.
As the market has changed, they are moving further and further towards digitizing their platform. Starting in 2017, they offered customers on-demand video streaming services, which expanded over the next few years.
Offering digital services has several advantages. The first and most obvious one would be that fewer people rent DVDs and similar products. Streaming services are largely replacing this old model, as people spend more time finding their entertainment online. The pandemic has sped up this process considerably. Additionally, a streaming service model means needing fewer physical assets. Therefore, Redbox will need to focus less and less on the upkeep and maintenance of their kiosks, and the products they rent. This should save up on their costs significantly in the coming years. Just at the start of the pandemic, their main source of revenue dropped 37.5%, from $809 million to $506 million. However, their digital services revenue had doubled from $20 million to $40 million in the same time period. This showed a promising future of growth.
RDBX stock strategy
Originally the company had not been public, but as their model changed they found that they needed to be. They had managed to do this via a merger with a special-purpose acquisition company (SPAC), helping it to raise the necessary funds. The initial RDBX stock price prediction would have been positive, and potential investors were optimistic based on the plans Redbox announced. Investors believed that the company had the necessary capacity to make its transition to the digital realm.
They predicted an EBITDA for the SPAC of $193 million by 2022, giving them a total valuation of $693 million. However, by 2021 the EBITDA was at -$15 million, giving a very poor outlook for 2022. In the end, this merger gave Redbox $88 million in funds. They went public in October 2021 and reached a high point of $17.93 for the stock within a month.
The optimism of the company itself had a sound basis. They believed that they could convert their loyalty members into stream viewers. That would give them a user base of 39 million. Their user satisfaction for their streaming services was very high, 86%. Acquiring new customers was thus much cheaper for them, costing them only $8 per customer. Other streaming companies would pay $100 to $200 to acquire a new customer. Therefore their initial expectations were understandable.
End of the stock
It was originally listed on the NASDAQ but was delisted by August 2022. By the end, the RDBX stock price had reached $1.65. Such a short period of time spent being on the NASDAQ and stock prices plummeting this quickly is unusual. This sudden change is easy to explain. Chicken Soup for Soul Entertainment is another entertainment company. It announced that it would acquire Redbox, briefly before the stock came off the NASDAQ, for $375 million. So keeping Redbox on the NASDAQ while it became a subsidiary was not necessary. Therefore it becomes obvious why the stock would soon become worthless.
The RDBX stock forecast plummeted soon after. Fortunately, stockholders were not left empty-handed and could acquire 0.087 of Chicken Soup for Soul Entertainment for each RDBX share held.
Most likely, their attempt to move into the digital world had failed rather quickly despite their attempts and had not been profitable enough. They had originally hoped their kiosk revenue would remain stable to support the rise of their streaming service. Unfortunately, their streaming service did not grow quickly enough to offset the losses of kiosk revenue they experienced. Allowing Chicken Soup for the Soul Entertainment to acquire them must have remained their only option.
Overall then the history of Redbox is another in a line of legacy media folding under new digital innovators. They had the correct business model and could have done well theoretically, but were too slow in making their transition. Their legacy model floundered before they could change over.
