Shares of Chicken Soup for the Soul Entertainment (NASDAQ:CSSE) plunged nearly 23% in after-hours trading on March 30 after the company made two surprise announcements.
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Before the market opening on March 31, the company first postponed the release of its fourth-quarter Fiscal 2022 results. Second, the business disclosed plans to sell additional shares of its common stock to the public. The company withheld information regarding the terms of the offering as well as the number of shares that would be offered.
The net proceeds from the offering will be used for “working capital and general corporate purposes.”
CSSE engages in the production and distribution of video content both on-demand and through license agreements across all media platforms worldwide.
Chicken Soup: Is Trouble Brewing There?
Chicken Soup is reeling from its acquisition of Redbox Entertainment in mid-2022. The company recently announced that it will be deferring staff bonuses from Q1FY23 to Q2FY23 in an attempt to preserve cash. Plus, the company even renegotiated deals with some of its title distribution deals. CSSE believes this is a better approach than employee reduction measures. The secondary offering must also be an effort to raise cash to fulfill these strategic changes.
Despite these factors, analysts retained their optimistic view on CSSE stock as they believe the long-term benefits from the Redbox acquisition will outpace the short-term pain.
With four unanimous Buys, CSSE commands a Strong Buy consensus rating on TipRanks. The average Chicken Soup for the Soul Entertainment price target of $19.33 implies a whopping 504% upside potential from current levels. The CSSE stock has lost 39% so far in 2023.
