If you’re looking to trade Redbox stock, rejoice my friend. It is now public, so we are updating our post to let you know you can trade it. The company officially IPO’d on October 25th 2021 and is tradeable. Being traders, we look at everything. The sentiment, the fundamentals, and the chart. Let’s take a deep dive into all three and see if this is something that should be on your radar or not.
At its heart, Redbox is a video rental service that allows users to rent DVD and Blu Rays from their red retail kiosks. Despite the secular trend of streaming video content, Redbox has maintained over 40,000 rental kiosks at participating retail outlets.
These include grocery stores, convenience stores, restaurants, and gas stations. If you’ve gone shopping in the U.S., chances are you know exactly where a Redbox kiosk is located in your neighborhood. Even if you’ve never used it. Redbox was established in 2002 and is based out of Oakbrook Terrace, Illinois.
Why is Redbox making headlines in a year where streaming services hit all-time high usage rates during the COVID-19 pandemic? Earlier in May, the company agreed to go public via a SPAC IPO merger with Seaport Global Acquisition Group. The estimated enterprise value is $693 million.
After the merger, Redbox now trades on the NASDAQ exchange under the ticker symbol $RDBX.
What is a SPAC IPO?
If you’re new to investing, you have no doubt heard the word SPAC thrown around investing discussions pretty regularly over the past year or two. SPAC stands for Special Purpose Acquisition Company. It’s a vehicle for a company to move from private equity to the publicly traded markets.
As opposed to a regular IPO or Initial Public Offering, a SPAC IPO is the merger between two companies; the SPAC and the company itself. In this case, Seaport Global Acquisition Group (NASDAQ: $SGAM) is the SPAC and Redbox is the company it is merging with.
The SPAC trades on the stock market as a publicly traded shell company. And the capital it raises through selling its shares, goes toward the company once the merger is complete. Any shares of the SPAC that are owned, will be transferred over to the new public company’s stock. As a result, any SGAM shares in this case will be converted to RDBX shares once the merger is complete.
Sound like an easy way to go public? It is. But it’s essentially being funded by investments of speculation, rather than backed by private equity in the case of a traditional IPO. There are fewer regulations on how the company reports forward looking growth and earnings estimates.
This is something that the SEC is currently trying to gain more control over. SPAC IPOs can go really well like in the case of Draft Kings (NASDAQ: $DKNG), or really poorly like in the case of Nikola Motors (NASDAQ: $NKLA) or Clover Health (NYSE: $CLOV). So keep an eye out for Redbox stock!
Movie Rentals and Streaming
A lot of people get Redbox confused with Netflix (NASDAQ: $NFLX), especially after the latter used to rent DVDs as well. Although Netflix did this almost entirely by mail.
Netflix abandoned the rental by mail model and moved to streaming content in 2007. But you can still get DVDs in the mail.
Redbox has done the same, some fifteen years after the fact. When you dig a little deeper, you’ll realize that Redbox’s model is slightly different from that of Netflix. With Redbox stock getting ready to hit the market, let’s take a look at some of their chief rivals once it becomes a public company.
Netflix (NASDAQ: NFLX)
The obvious one, and the king of global streaming, Netflix has over 208 million paid subscribers across 190 different countries. From renting DVDs by mail to a global phenomenon that’s become synonymous with streaming, Netflix has grown to be a $222 billion company that spends upwards of $20 billion per year on producing original content. Netflix relies on subscriber fees though. Something Redbox has avoided with their model. Instead of logging into an account, Redbox has created an on demand site that users can use to pay for rentals or digital downloads.
Disney+ (NYSE: DIS)
Another mega streaming service that relies on subscriber fees is Disney+. They were the fastest growing streaming service during the COVID-19 pandemic. With movie theaters closed, Disney utilized its streaming platform to launch new movies for a premium fee that families could watch from the comfort of their own homes. Disney and Redbox actually had some legal issues a few years back. They sued Redbox for violating copyrights in order to allow its clients to download Disney movies.
Fubo (NYSE: FUBO)
This one’s probably not as familiar to some of you. However, FuboTV is an up and coming player in the streaming industry that has an emphasis on sports. FuboTV is fast penetrating markets in the U.S., Canada, and Spain, with more countries being added in the future. FuboTV also relies on subscribers. But like Redbox, is focusing on a niche population of viewers. They’re planning to add sports betting integration at some point in the future.
Genius Brands (NASDAQ: GNUS)
If you thought FuboTV is a small company, wait until you hear about Genius Brands. The company operates with a $478 million market cap and provides its app for free on mobile phones, tablets, and Smart TVs. The crown jewel of Genius Brands is the Kartoon Channel/ This shows children’s cartoon shows that include titles like Roblox (NYSE: $RBLX), Stan Lee’s Superhero Kindergarten. And Shaq’s Garage. Why is Genius a good comparison? It runs the same model as Redbox with no need for subscription fees. Genius runs free through most streaming boxes, and relies on advertising during the cartoons to pay its bills.
Does Redbox Stock Actually Have a Chance to Succeed?
As an investor, you’re going to want to temper your expectations. Redbox isn’t going to be the next Netflix or Disney; that much we know. But it’s pulling some interesting levers that may prove to be financially viable in the future.
First, Redbox reported 39 million members. Although allegedly only about 13 million members are active (back to the loose regulations on how SPAC IPO companies report their numbers). Redbox already has some brand loyalty. And now that it’s backing its Redbox on Demand platform, it’s holding the hand of late adopters with a streamlined and easy to use app that doesn’t require a subscription.
Next, Redbox is also planning to get busy making its own original content through its Redbox Entertainment division. So far, Redbox has released 16 original films, with another 24 on the way. Redbox reported that it’s optimistic it can regularly complete 36 original titles annually.
The company is taking a page out of the Netflix playbook. Redbox will need to ensure that it can actually afford to fund these pictures. And therefore, meet Netflix’s quality for original content. Redbox also believes that DVDs and Blu Rays aren’t dead and that there’s still a wide demand for the formats.
If the company can focus on its streaming on demand platform, management is estimating a 27% CAGR or compound annual growth rate for revenues, and 28% year over year growth in EBITDA. If this checks out, Redbox could have revenues of over $1.1 billion by 2023. Redbox notes that customers have rented over six billion DVDs and Blu Rays from Redbox over the past eighteen years.
Where Can I Watch Redbox?
Literally anywhere these days! With Android and iOS apps available for free, you can download and watch from your mobile device or tablet. Redbox can be used with most SmartTVs and streaming boxes such as Amazon Fire TV, Apple TV, and Roku. Of course if you really wanted to you can still visit one of Redbox’s retail kiosks and watch your movie the old fashioned way!
Redbox Stock Final Thoughts
The sentiment surrounding SPAC IPOs isn’t very bullish right now. And Redbox may find it difficult to attract investors to a streaming industry that’s already dominated by some major players. Admittedly Redbox is still going strong in its retail market. And the brand does have a loyal and faithful following that should keep the Redbox on Demand streaming platform in business.
It’s definitely promising to see Redbox branch out; especially after it dropped the video game rental business from its brand. Creating original content can be a difference maker in this industry. Just ask Netflix how much shows like Stranger Things, Ozark, or Orange is the New Black did for its subscriber growth.
All Redbox needs is one big hit to attract a new market of fans. And with no subscriber fees, it could be an attractive sentiment considering streaming services were supposed to be a cheaper alternative to paying for a monthly cable service. Instead, paid streaming services are popping up everywhere and it’s going to end up being more expensive than cable.
In the end, Redbox is going to have to distinguish itself from a crowded field that has added NBC’s Peacock, HBO Max, Apple TV, Amazon Prime, Paramount Plus, and Hulu. In addition to the ones we already discussed earlier. It’s going to be an uphill battle for Redbox, so investors may want to wait a few quarters to see how this one plays out before diving in head first with an investment.