Why Redbox Entertainment Is Surging Higher Today

What happened

Shares of movie rental kiosk company Redbox Entertainment (RDBX 46.67%) were bucking the sell-off occurring in the broader market by surging 34% at 11:25 a.m. ET on Friday. 

Where the Dow Jones Industrial Average was down 741 points, or 2.3%, and the S&P 500 was off over 108 points, or 2.7%, Redbox was rallying $3.22 per share higher from yesterday’s close to $12.69 per share.

So what

Redbox has become the latest meme stock celebrity after the short interest in its shares rocketed to 210% of its float. That has been the hallmark of many of the market’s meme stock favorites — extraordinarily high short interest, which leads small retail investors to pile into the stocks in hopes of generating a short squeeze.

It’s certainly something better to hope for than the conclusion of the Redbox acquisition by Chicken Soup for the Soul Entertainment (CSSE -4.25%), since investors in the movie rental business will be getting 0.087 shares of Chicken Soup for the Soul for every Redbox share they own. That valued the kiosk owner at around $375 million, which includes $50 million worth of Chicken Soup for the Soul stock and $325 million in Redbox debt that’s being assumed. 

Redbox’s market cap is currently almost worth $446 million.

Now what

The deal is almost certainly going to be completed since virtually all of both companies’ investors have signed off on the acquisition. A short squeeze just might allow some investors to cash out sooner with greater value than what they will realize from the buyout. The key is to not be the last one holding the bag.