Kustom Entertainment Inc. (NASDAQ: KUST) experienced a notable increase of 40.28% in its stock price during after-hours trading on Tuesday, reaching $2.96 per share. This rally followed the company's announcement of a non-binding memorandum of understanding to divest its video solutions division. Conversely, in regular market hours, Kustom's shares closed at $2.11, reflecting a decrease of 2.76% for the trading session, as per Benzinga Pro data.
The proposed transaction involves selling the video solutions segment to Cycurion Inc. (NASDAQ: CYCU), a Virginia-based firm with technology-enabled services. The agreement's estimated valuation ranges from $6 million to $8.5 million, contingent on pro forma financial analysis. The consideration for this transaction is structured with a cash component of $1.0 million to $1.4 million, supplemented by the issuance of Cycurion preferred stock for the balance.
Kustom Entertainment's leadership highlights the strategic rationale for the sale as an opportunity to refocus efforts and resources. Emphasizing its commitment to live event production and proprietary online ticketing platforms, the company aligns this transition with its recent rebranding under the Nasdaq umbrella.
CEO Stanton E. Ross articulated that divesting the video solutions business enables the company to concentrate on the substantial potential within the entertainment industry. This reallocation of focus is integral to the company's long-term objectives and operational priorities.
It is important to note that the agreement is non-binding and remains subject to customary closing conditions and the finalization of negotiations. Therefore, the completion of this deal has inherent uncertainties pending further developments.
From a market data perspective, Kustom Entertainment currently holds a market capitalization of approximately $1.69 million. The stock's Relative Strength Index (RSI) stands at 43.19, indicating a moderate momentum level. Over the last 52 weeks, the stock price has experienced significant volatility, peaking at $4.48 and bottoming at $1.80.
Founded as Digital Ally, Inc. before its rebranding earlier this year, Kustom Entertainment has endured a challenging year marked by a substantial stock value decrease of 99.88%. Currently, its share price rests near the lower boundary of its 52-week range — only about 11.57% above the minimum — signaling limited recovery to date.
Given the stock's pronounced decline and recent volatility, any meaningful reversal in market sentiment will require confirmation through consistent performance indicators before investors might consider re-engagement.