Despite its massive short interest and “meme” esque price action, $RDBX is one of the more unique merger arbitrage opportunities for the fact that it’s merger price is at a massive discount to its current trading price.

Redbox is being acquired in a stock-based transaction by $CSSE where each Redbox share gets 0.087 shares of the combined company. At $CSSE’s current closing price of $6.36, this would imply an acquisition value for Redbox of just $0.55, an over 85% discount from its current price.

How is this possible? Because Redbox is about to go bankrupt. In the merger agreement it’s stated that Redbox will default on its debt if either

A) the merger agreement with $CSSE is terminated… or

B) The merger is not completed before October 31st, 2022 (unless creditors give an extension)

This creates a unique scenario where Redbox has to merge at a value of $0.55 before October 31st or go bankrupt, eliminating the normal risk of a merger not being completed (since the alternative is going to $0 by defaulting).

The stock is ripping in the meantime anyways but will be very interesting to look back in six months!