Vinco Ventures Stock Is Having a Great Run, But the Risk Is Significant

I’ve been writing about investments since 2004. Rarely have I seen a press release like the one Vinco Ventures (NASDAQ:BBIG) sent out to announce its annual proxy details for owners of BBIG stock.

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So riveting was its press release, InvestorPlace’s Chris MacDonald discussed the seven most important things to know about its corporate presentation that Vinco included in its proxy. 

A total of six pages, excluding the cover page and legalese at the end, the presentation boosted Vinco Ventures stock by more than 10% over the next two trading days. 

As I write this, the company’s stock has cooled off a little but is still much higher than its $2 price a month ago. BBIG trades today at just above $8.

The last time I wrote about BBIG was at the beginning of August. I called it “a very big dog with fleas.”

While I shake my head at the insanity of the current markets, Vinco’s management seems to be slicing and dicing their way to shareholder riches. 

Can its winning streak last?

The Latest Hysteria Surrounding BBIG Stock

As my colleague mentioned in his Sep. 8 article, Vinco plans to spin off several of its assets held by its Emmersive Entertainment LLC unit into a separately traded public company called Cryptyde.

It will focus on acquisitions related to blockchain technologies. It will also hold the company’s E-NFT tokenization platform.   

If you go to the E-NFT website, you’ll see that Emmersive Entertainment thinks very highly of itself and E-NFT.

“The E-NFT is the next NFT market disruptor, offering non-fungible art and memorabilia in a way never before seen by utilizing our unrivaled creative team and programming prowess.” 

I’m sure everyone behind Emmersive are fine people. 

However, I’m struggling to understand why the company didn’t issue a separate press release with the update on what’s happening with Emmersive’s spinout. It’s almost as if Vinco understood that it wasn’t introducing anything new to investors, so the proxy release was an excellent excuse to string shareholders along. 

The Emmersive Opportunity

Vinco previously announced in June that it was planning to spin out Emmersive. It’s right there in its June 24 press release

“This is a great opportunity for the shareholders of record on the effective date,” Vinco CEO Christopher Ferguson said in June. “The technology that Emmersive continues to develop is I believe industry changing and we felt the best way to ensure the shareholders receive that value is by splitting the two entities and providing the shareholders the proverbial ‘two bites of the apple.’”

The funny thing is, it only acquired Emmersive in April in an all-stock transaction that saw Vinco issue one million preferred membership units to Emmersive’s shareholders that they could convert into one million BBIG shares.

In addition, the Emmersive management had four earnout targets worth an additional four million conditional preferred units that ultimately could be converted into four million Vinco shares.

Assuming all the units convert to shares, Immersive was acquired for approximately $52 million at current prices. However, at the time of the acquisition, the preferred units and conditional preferred units were $2.1 million and $5.3 million, respectively. 

On paper, it paid $7.4 million, but the ultimate cost could be much higher. And that’s for a business with almost no revenue to speak of. 

The Bottom Line

Vinco currently has a trailing 12-month revenue of $10.5 million. Based on a market capitalization of $1.09 billion [104.06 million shares outstanding multiplied by $10.44 share price], it trades at 104x sales. 

Under most circumstances, I would recommend avoiding this multiple because the odds of a company living up to those expectations are unlikely. 

However, the fact that Hudson Bay Capital Management — 13F assets under management over $8 billion — has lent the company well over $120 million in 2021, I can see why investors have been piling into BBIG stock.

I’m 100% certain I wouldn’t invest in this highly speculative stock. Still, for those who can afford to lose their entire investment, Vinco management appears to be slicing and dicing its way to increased shareholder value.   

Whether they turn out to be posers will only be answered with time. 

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.

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