If you visit the website of a publicly traded company and within a very short time you cannot understand the nature of its business, there’s a big problem. That’s the case with Vinco Ventures (NASDAQ:BBIG). The company’s profile isn’t concise. With that in mind, let’s take a closer look at some things to consider before diving into BBIG stock.
First, let’s start with what I mentioned above: the company’s inclination toward providing vague information.
BBIG Stock: A Closer Look at Vinco’s Vague Website
According to Vinco Ventures — its “B.I.G.” strategy encompasses three core elements:
- “Buy – Acquisitions is our model. We will seek to acquire significant brands to continue to add to the Portfolio.”
- “Innovate – Leverage the internal traffic platforms of Honey Badger and Social Pulse Media, our brands can quickly innovate and determine the highest conversion traffic and target accordingly. Once identified, we scale while maintaining conversions for success.”
- “Grow – More targeted traffic equals more conversions. With our internal engines, we can expedite the growth of our acquired brands to reach their target numbers quicker.”
The first impression here is not a good one. This “B.I.G Strategy” is vague. What is Honey Badger? What is Social Pulse Media exactly? What particular type of brands will it acquired? What is “the new market opportunity” the company references? There are far more questions than answers here.
This led me to visit the presentations page for more information. What did I find? A blank page. Not at all useful information.
Looking back at the profile page again, there are numerous brands listed, but none have a link to help clarify what each involves. Again, this degree of vagueness is not a good thing for a publicly traded company.
Then there’s the issue of how the company classifies itself. It says it’s in the consumer/industrial sector, and consumer products and packaging industry. It delineates this further into the following product focus: “Games, Toys, and Children’s Vehicles, except Dolls and Bicycles.”
It seems like we might get some clarity there, but when you look at the company’s news section, there’s nothing related to the industrial sector.
I could go on and on about how vague and non-informative the company’s website is. But moving beyond this initial red flag, there are more things to consider when looking at BBIG stock.
Business News and Business Model
The latest news is that company has completed an acquisition of Lomotif, owner of a short form video platform. The other piece of news relates to the company’s involvement in a music streaming on-fungible token (NFT) platform. On the surface level, none of this is bad news. But it illuminates a general lack of focus.
Harkening back to how the company defines itself, it supposedly manufactures games and toys. But now it has moved to its own Lomotif short-form video platform?
The missing part of the puzzle here is that according to Market Realist “In January, Vinco announced a merger deal with Zash, which is a digital content distribution company. Zash aims to build what it describes as a “virtual” Hollywood. Its technology helps digital content creators and online influencers expand their brands globally.”
In this reverse merger, Zash will become the controlling company. Now that explains the shift to business operations related to social media and entertainment. But Vinco Ventures appears to be too optimistic about this Lomotif platform.
It states that “Lomotif is one of the top short form video platforms in the world with hundreds of millions of installs around the world and tens of millions of monthly users (*Sensor Tower data, June 2021) and over 31 million on-platform monthly active users (“MAUs”).” The company also states that “Third-party independent valuation shows the combined companies have a valuation over $5 billion as of June 30 according to recent private financing comparable valuation by Gemini Valuation Services.”
What’s astonishing here is that BBIG stock is backed by a market capitalization of $175.57 million. So how is it possible to buy something estimated worth $5 billion?
Even if you offered all of the shares the money is not enough.
Financials: Now Everything Makes Perfect Sense
The financial results for the three months ended March 31, 2021, showed important highlights:
- “Revenue for the three months ended March 31, 2021 increased to $2.57 million as compared to $1.95 million for the three months ended March 31, 2020, a 31.32% increase.”
- “Net loss for the three months ended March 31, 2021 was $62.47 million, or ($3.27) per basic and ($3.28) per diluted share, compared to a net gain of $1.27 million, or $0.166 per basic and $0.13 per diluted share for the three months ended March 31, 2020.”
Vinco Ventures has EBIT after Unusual Expense or operating income that is negative for 2019 and 2020; net losses for 2018, 2019 and 2020; and negative free cash flow again for 2018, 2019 and 2020.
Finally, data from Morningstar shows that the book value per share has been $1.46 in 2018, $1.26 in 2019, 81 cents in 2020 and -33 cents for the trailing twelve months.
If destroying the book value per share is a “B.I.G Strategy” then you get my point about BBIG stock.
Avoid it. Rather than building value, the company has destroyed value.
On the date of publication, Stavros Georgiadis, CFA did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
