Vinco Ventures Is a Very Big Dog With Fleas

I continue to be amazed by the number of crappy investments that the Reddit crowd is willing to explore in their search for their own personal lottery payout. Vinco Ventures (NASDAQ:BBIG) stock is one such example.

BBIG stock the words "penny stock" on a black label over a black and white image of hundred dollar bills
Source: Shutterstock

Trading at $3.43 as I write this, BBIG stock is definitely worthy of the penny-stock moniker. 

Here’s why.

Better Options Than BBIG Stock

Based on 27.94 million shares outstanding as of May 24, the consumer product research company has a market capitalization of $91.1 million. According to Finviz, 10 micro-cap stocks have a current market cap between $91 million and $92 million. 

Several of the names would make much better investments than BBIG. 

For example, Educational Development Corp. (NASDAQ:EDUC) has a market cap of $91.7 million. As the same suggests, it is in the children’s educational publishing business. It is the U.S. co-publisher for titles produced in the U.K. by Usborne Publishing and it also publishes its own books under Kane Miller Book Publisher.

The majority of its revenue (96% in 2020) comes from its Home Business division, otherwise known as Usborne Books & More, or UBAM. The books are marketed and sold through independent consultants. 

In fiscal 2021 (Feb. 28, 2021 year-end), EDUC had revenues of $144.6 million, almost double its sales in 2020. On the bottom line, it had a net income of $12.6 million, 125% higher than in 2020. On a per-share basis, earnings grew 120.5% due to more shares outstanding.

In fiscal 2021, it had free cash flow (FCF) of $3.67 million. That gives it an FCF yield of 4%. 

Importantly, the company’s directors and executive officers own 26.9% of the company. CEO Randall White owns 16.6%. That suggests management’s interests are aligned with shareholders. Even better, the COO, CFO, and chief sales and marketing officer own 9.1% of the stock. 

On July 13, CEO Randall White, 79, moved into the executive chairman role, with COO Craig White becoming president and CEO. He is only 52. With the company since 1983, expect him to remain CEO for a long time to come. 

Currently trading at 7.3x earnings, you would have to be a total dolt not to consider EDUC over BBIG. 

The Vinco Business

Unlike Educational Development, Vinco Ventures does not have the same long-and-storied history. BBIG’s past is a convoluted one. 

Incorporated as Idea Lab X Products Inc. in July 2017. It changed the name two months later to Xspand Products Lab Inc. and then a year later in 2018 to Edison Nation Inc. It then merged with its subsidiary, Vinco Ventures, in November 2020. 

So, four different names over four years.

If you go to the Edison Nation website, you’ll see a very slick presentation. It almost fools you into thinking it operates a thriving business. But, alas, it’s all show and no go. 

In the latest quarter ended March 31, it had an operating loss of $10.7 million from $2.57 million in sales.  

Honestly, the company’s 10-Q is akin to running through a minefield. For example, on page 15, it discusses various acquisitions it’s made. None of which seem to involve much cash getting exchanged but a whole lot of shares being issued. 

It mentions its subsidiary, Honey Badger Media, and acquiring certain assets for $300,000 in cash and 750,000 in shares. At current prices, the acquisition works out to close to $3 million.  

I went to Honey Badger’s website. Again, it makes a very slick presentation that mentions partner brands but doesn’t show any on its site. 

Who falls for this stuff? Really. 

The Zash Global Media Merger

My InvestorPlace colleague, Mark Hake, recently discussed the merger with Zash Global Media. Well, actually, it’s a reverse merger with the people behind Zash taking control, although the Vinco Ventures name and BBIG stock symbol live on. 

On July 23, Vinco announced that its ZVV Media joint venture with Zash had closed its acquisition of short-form video platform Lomotif.

“We couldn’t be more proud to have Lomotif as the crown jewel of our media and entertainment company alongside ZASH and Vinco Ventures,” said Ted Farnsworth, co-founder of ZASH. “The combination of these three entities makes an incredibly robust and totally disruptive media and entertainment company worldwide, with tens of millions of monthly users around the world that allows us to leverage all of our content globally.”

However, the companies provided no details.

My colleague believes Vinxo will be the public company that raises funds for Lomotif to grow. However, it all seems very sketchy to me. 

What we do know is that Farnsworth was chairman of MoviePass from 2017 to 2020. Farnsworth was at the helm when the movie subscription business spectacularly collapsed in 2019. 

Here’s some of what The Verge’s February 2019 article had to say about Farnsworth.

“He’s been sued numerous times, according to the Miami Herald, and he found his way into a chief executive role after years spent racking up legal disputes in Florida, related in some cases to real estate investments and other inscrutable financial dealings,” The Verge’s Nick Statt reported. “The Herald reports that Farnsworth has registered more than 50 companies over the last 30 years, a majority of which have shuttered.

But you go ahead and put your money into BBIG stock. Just remember you were warned.

On Penny Stocks and Low-Volume Stocks: With only the rarest exceptions, InvestorPlace does not publish commentary about companies that have a market cap of less than $100 million or trade less than 100,000 shares each day. That’s because these “penny stocks” are frequently the playground for scam artists and market manipulators. If we ever do publish commentary on a low-volume stock that may be affected by our commentary, we demand that’s writers disclose this fact and warn readers of the risks.

Read More:Penny Stocks — How to Profit Without Getting Scammed

On the date of publication, Will Ashworth 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 Publishing Guidelines.

Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia. At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.

Article printed from InvestorPlace Media,

©2023 InvestorPlace Media, LLC