On the surface, Vinco Ventures (NASDAQ:BBIG) stock looks like an “avoid at any cost” type situation.
Not only because it’s a meme stock that has seen a dramatic surge in price thanks to its short-squeeze status, and not because of the hype surrounding its latest wheeling-and-dealing.
Despite a recent investor presentation, much remains a mystery with this company and its plans, as was the case when I last wrote about it on Aug 6.
There’s also the fact there’s a key player in this situation who was involved in a high-profile publicly traded venture that crashed and burned.
Putting it simply, it makes sense why my InvestorPlace colleague Dana Blakenhorn referred to it as a situation that will end in tears. Then again, while Vinco just screams “flash in the pan,” it may not turn out as badly as expected.
Depending on how subsequent events play out this meme favorite may have the potential to bounce back toward its highs. Tread carefully if you want to buy it, but be careful if you want to short it.
BBIG Stock, Lomotif and the Cryptyde Spinoff
Compared with other meme stock favorites of past and present, the “story” with Vinco Ventures is a bit more complicated. In fact, it’s more like a bunch of stories at once.
For instance, you have the company’s ownership stake in Lomotif. A video-sharing platform that’s trying to become the next TikTok, Lomotif is 80% owned by ZVV. Vinco owns 50% of ZVV, with the other half held by ZASH Global Media, which this company made plans to merge with earlier this year.
At the same time, you have the NFT (non-fungible token) “story” with BBIG stock. The company got into the NFT game earlier this year but now plans to spin off this segment into a separate publicly traded entity, Cryptyde.
Per the company’s latest investor presentation, if approved, Cryptyde will be spun off to shareholders of record as of Oct 15.
With its ownership of a possible TikTok rival, with high short interest and NFT exposure to boot, it’s no shock the Reddit set took to this stock like a moth to a flame. Starting in late August, they began to buy it in a big way. This sent shares from around $2.50 per share to as high as $12.49 per share.
In recent days, shares have fallen by nearly 50%, trading today at around $6.30. With its many red flags, it may seem destined to head even lower. Even so, joining the crowded short side may not be the best move.
Plenty of Red Flags
BBIG stock has plenty of red flags to go with what makes it an exciting opportunity for retail traders.
The investor presentation answered some questions about the company, such as details about the company’s cash position and share count. Also, a breakdown of its outstanding warrants and the dilutive impact once exercised.
That said, the report was murky when it came to other details. For example, there’s no discussion in the presentation about the still-pending Vinco/ZASH tie-up.
A press release from May 28 indicated the deal would close in July, but it appears the merger is still pending as of this writing. There’s also not much in terms of financial numbers when it comes to Lomotif, just the mention of it having 30 million monthly active users (MAUs).
The other big red flag has to do with the “key player” mentioned above. His name is Ted Farnsworth, who was the chairman of the now-defunct MoviePass movie theater subscription service.
Farnsworth co-founded ZASH, and will likely play a big role in Vinco going forward. Whether Vinco will share the same fate as Farnsworth’s last big venture remains to be seen.
Nevertheless, even with these red flags, and the fading chatter about it on Reddit’s r/WallStreetBets and elsewhere, it may not necessarily be a slide down to pre-hype prices (below $2.50 per share).
Be Skeptical, But Don’t Underestimate Vinco Ventures
It be too soon to write off Vinco Ventures. The stock may see another pop if shareholders vote “yes” for NFT spin-off, and investors buy ahead of the company distributing Cryptyde shares as a stock dividend.
As our Mark Hake has discussed, more clarity about the true value of Lomotif could help the stock move higher as well. The ZVV vehicle paid $125 million for it earlier this year, making for now claims it’s worth $5 billion today dubious.
It’s best to approach BBIG stock with a critical eye. But given it could soar again, if there proves to be substance to go along with the hype? It’s best not to underestimate it.
On the date of publication, Thomas Niel 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.
Thomas Niel, contributor for InvestorPlace.com, has been writing single-stock analysis for web-based publications since 2016.