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Redbox Stock - Short Squeeze Coming? - Know The Risks $RDBX Stock Update - YouTube
Channel: Paul Thomas Investing
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what's up investors and welcome back to
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the channel today i want to talk about
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redbox nasdaq ticker or dbx this penny
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stock is about to go insane and could be
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the biggest short squeeze of 2022.
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redbox stock has already gained over 150
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in the past month but considering just
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how much this stock is being shorted i
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believe that this is just the beginning
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of what might be a 10x or more but be
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under no illusions there is a reason why
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this stock is being so heavily shorted
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and in this video i will explain
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everything that you need to know that
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should help you learn how to get in and
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out of the short squeeze play in the
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past week there has been a lot of social
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media hype around this talk too and some
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of it is just straight up lies so in
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this video i will shed some light on the
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real facts that you need to be aware of
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this penny stock could easily 2x within
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days and i feel that this could
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definitely be a penny stock to buy in
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may if you do like this video can i ask
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you to smash the like button i'm aiming
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to get 300 likes on this video help me
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achieve that goal it literally cost you
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nothing but it helps me out so much i
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tweeted about redbox on wednesday and
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this went on to gain over 75 in the next
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48 hours so if you're new to this
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channel make sure you subscribe and
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follow me on twitter to stay up to date
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and remember to turn on notifications so
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you never miss a video with the
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potential to make you money i want to
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point out that i'm not a financial
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advisor and this is not financial advice
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now let's get into it with a quick
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overview of the company and the
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investors presentation for anyone that
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is unfamiliar with redbox as a company
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redbox is a once leading entertainment
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company that gives consumers access to a
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large variety of content across digital
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and physical media
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redbox is known for their bright red dvd
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rental kiosks that tend to be placed in
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busy retail locations to offer a
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selection of dvds that can be rented for
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a few dollars the company also operates
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a growing digital stream service that
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provides paid movies from hollywood
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studios and hundreds of content partners
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as well as over 130 channels of free
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ad-supported streaming television redbox
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was founded 20 years ago
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and was once the low-cost competition to
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video rental stores like blockbuster
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adding thousands of new kiosks each year
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but now redbox finds itself on the other
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side of innovation replaced by streaming
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services and on-demand digital rental
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after growing rapidly for several years
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redbox slowly seen its market decline as
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the likes of netflix or amazon prime
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started to grow rapidly
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but redbox does still have about 40 000
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kiosks throughout the united states
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in fact when we look at the investors
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presentation they estimate that ninety
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percent of all americans are within a
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five minute drive of a kiosk which does
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provide huge exposure that the company
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can take advantage of
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one of these ways to take advantage is
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the digital out of home ad opportunity
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with four thousand digital video screens
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being installed across retail placements
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to enhance in-store marketing
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capabilities
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with the opportunity to expand more
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broadly across kiosk network and they
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estimate this to provide
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a 70 million dollar potential annual
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revenue opportunity
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but it appears that the main focus for
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redbox right now
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is the shift from video rentals through
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their kiosks over to subscription video
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on demand by converting a small
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percentage of existing customers
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to consistent multi-product users
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could lead to 800 million to over 1
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billion in annual revenues from this
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alone for comparisons netflix who
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recently
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published their quarterly earnings
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report reported nearly 8 billion dollars
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in revenue for a three-month period
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and this was considered a terrible
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quarter with the stock tanking about 50
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percent in april
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now redbox is no netflix but then again
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12 years ago neither was netflix
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12 years ago redbox was the established
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company that looked to have a huge
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future especially after blockbuster
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closed up and other rental stores
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followed suit but it was netflix that
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made the most of technology and now it
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is up to redbox trying to save itself
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but the fact remains that if redbox can
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successfully convert the other business
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into a globally recognized subscription
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video on demand service then today's
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valuation of just 270 million dollars
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could seem like pennies
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now how many times have you heard people
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refer to some penny stocks as
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this stock is like buying amazon
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or buying google or tesla when it was
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only a few dollars well right now buying
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redbox could literally be like buying
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netflix when it was only a few dollars
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but there are some caveats to this
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some very very big ones
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to explain this this talk went public
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late last year through a reverse merger
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with the spac
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seaport's global acquisition corp and
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despite initially going as high as 27
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or dbx dock began to tumble
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dropping as low as 1.61 cents last month
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now i tweeted about this a few days ago
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when the stock was still just three
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dollars that this stock could make
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another 100 gain easy
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right now rdbx stock has got a growing
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army of followers
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and unlike some of the meme stock
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squeezes or pumps or whatever you want
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to call them over the past few months
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this company
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actually has got true meme stock
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potential
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now that is not me trying to discredit
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the actual business but this does have a
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lot of similarities to gme stock back in
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2020
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in the long term
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redbox might be able to build back up to
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a successful company but right now this
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is a short squeeze play and for the
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first time in a long time this is a
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short squeeze where the numbers do
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actually add up first of all this stock
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is heavily shorted and that is not
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really surprising when you see the
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company's financials so stick around for
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when i look at these in a moment the
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financials are an extremely important
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part of the overall investment look at
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this stock even if you were just
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interested in the short term squeeze
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play
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understanding a company's financial
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statements will help you understand
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whether to hold or to sell when a stock
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starts to drop again
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another
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major factor here is that there is
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actually a very small number of shares
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overall and a small free float
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so look at this post over on reddit this
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was from two days ago
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by everything crypto 2018. 52 percent of
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the free float is short the average
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borrow cost is 320 percent
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75 percent of the free float is on loan
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100 utilization
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and a tiny free float of only 2.7
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million
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and this data has been taken from
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ortex.com but he also states here
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the five reasons why this is fair and
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away the best squeeze play on the market
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the number one the shares are cheap
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although they've gone up a bit since
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this post
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but there are no options
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so this can't be easily manipulated as
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some of the other squeeze plays people
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are talking about
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number two this is absolutely critical
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for people to understand the free float
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is only 2.7 million the main reason most
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squeezes don't end up coming to fruition
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is because the float is too large
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this float is tiny
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for comparisons the float of a tyrion is
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26.2 million
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nothing against atr stock just trying to
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illustrate how tiny the red box float
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really is think about it 52
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of 2.7 million is short which means
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there are only 1.3 freely traceable
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shares all retail has to do is buy the
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float which sounds crazy but it's
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absolutely doable in this case it's only
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a million shares if 5 000 people were to
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buy 200 shares each the entire free
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float will have been bought
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now this really does have so many
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similarities to gme stock two years ago
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and i feel that although redbox has gone
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from the lows of 160 up to 590 i think
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that this is still just the beginning
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take a look over at stock twits for
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example i remember when the message
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volume from mullenstock was less than a
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few hundred a day then at its peak it
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went up to over one hundred thousand now
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i'm not comparing mullen to redbox as
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companies these are not on the same
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level at all that was simply a stock
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that was hyped up by people for various
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reasons that i won't get into here i
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have made videos about mullen where i've
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explained my thought process on that
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stock i just want to illustrate just how
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early we are right now in red box this
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stock has been gaining day after day now
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for about two weeks but had largely went
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under the radar it was only on friday
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when the stock gained over 69 percent
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that everyone started to take real
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notice but look at this the message
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volume here is still only about six
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thousand a lot of people
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are still not aware of this stock and
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think of the amount of gains this stock
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has already seen with very little
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interest i really do think that this
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could explode next week as the level of
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interest dramatically increases rdbx
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stock is currently number three on the
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most active list and number one on the
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new watchers list and the stock was also
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trending on friday and will be trending
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again on monday so before we look at the
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charts let's take a look at the most
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recent earnings report and this should
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help everyone to understand the risks
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involved here if you are considering the
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long hold which should also show you
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exactly how this stock has ended up
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being so heavily shorted in the first
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place looking at the company's balance
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sheet we can see that they have total
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assets of 378 million dollars and total
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liabilities of 440 million this means
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that redbox is in negative equity to the
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value of 62 million
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to make matters worse
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long-term debt is by far the largest
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liability while goodwill is recorded as
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the biggest asset now if you follow this
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channel you will know that i hate to see
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goodwill being stated as one of a
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company's major assets
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goodwill is not a real asset goodwill is
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basically the opposite of a bargain
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purchase where an asset is bought for
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below its fair value the difference must
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be recorded somewhere the same goes when
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an asset is purchased for above its fair
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value in this case the difference is
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goodwill and gets recorded in the
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non-current assets my problem with
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goodwill is that it is not tangible it
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is not real
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this 147 million dollars could simply be
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written down as an impairment in the
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very next earnings report so i tend to
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remove goodwill from my calculations
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when analyzing companies this would
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leave total assets of 230 million
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dollars compared to total liabilities of
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440 million to put this simply this is a
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terrible balance sheet current
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liabilities are also two times current
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assets and the fact that they have only
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18 million dollars in cash
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is very worrying
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for rdbx stock this coupled with the
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fact that revenues have been dropping
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dramatically year over year down 66
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percent from 800 million in 2019 down to
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280 million in 2021. this is made even
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worse because costs have not even halved
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what was once a profitable business is
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now a huge loss maker losses of over 140
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million dollars for 2021 so this raises
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a huge going concern issue for this
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company and we can see here in the notes
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to the accounts just how bad things
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really are
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in january
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redbox borrowed the remaining
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availability under its revolving credit
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facility and on the 1st of april 2022
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the company announced a reduction in
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force of 150 employees which should lead
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to a reduction in cost of 13 million but
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this is only a fraction of what is
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needed
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and management have highlighted the
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level of the problems that they are
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facing there is substantial doubt about
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our ability to continue as a going
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concern and this could materially impact
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our ability to obtain capital financing
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and the value of our common stock if we
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cannot continue as a going concern our
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stockholders would most likely lose all
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or most of their investment in us and
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holders of our indebtedness may also
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suffer material losses on their
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investments so make no mistake about
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this i really cannot state this strongly
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enough
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anyone who is considering investing in
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this company for the long term this is
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extremely high risk
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extremely high risk and not a good risk
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to reward ratio
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now this is not financial advice in any
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way do what you want but i can only see
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two things happening here
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either redbox do not do an equity
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offering and they go bankrupt within the
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next 18 months
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or once the share price peaks on its
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current run we will probably get an
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announcement that management will dilute
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shareholders just yesterday it was
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disclosed the red box gets access to 50
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million dollars in additional financing
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as part of a restructured agreement with
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hps investment partners
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this will do very little in the long
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term
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considering the level of losses being
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made but this could help with the short
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squeeze scenario
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looking at the charts we can see that
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the stock went public back here in
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november and then the steady decline
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that the stock made before bottoming out
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in february and march and looking closer
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we can see just how much the stock has
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risen over the past 10 days from less
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than two dollars on april 20th to over
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six dollars on friday i do expect that
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this stock will run strong again next
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week and i would not be surprised to see
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this break ten dollars within a few days
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however but if this does begin to drop i
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would not be surprised to see this drop
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heavily after all there is a reason why
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this is so heavily shorted there is a
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reason
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every analyst covering this talk have
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all slashed their ratings and price
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targets recently the most recent of
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these being can accord dropping their
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price target from sixteen dollars to
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just three dollars ironically the day
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that they slashed their price target was
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also the day that the stock began to
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rally hard so guys what do you think of
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redbox will you be investing in this
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talk either in the short squeeze or for
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long-term potential drop of comments and
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let me know what you think of this
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company and if you enjoyed my video i
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would greatly appreciate if you could
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smash the like button and hit the
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subscribe button if you're new to the
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channel follow me on twitter and i'll
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catch you in the next video
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