The recent gyrations of Vinco (NASDAQ:BBIG) stock show that meme-stock investors still had some power left at the beginning of September.
But unfortunately for the owners of BBIG stock, that power appears to be quite limited and may have since largely ended.
Meanwhile, Vinco seems to be extremely overvalued, while its fundamentals are at best murky and at worst quite weak.
In a recent article, InvestorPlace columnist David Moadel, reported that “there’s evidence that Reddit traders {recently} may have taken an interest in Vinco Ventures.” He went on to suggest it could be the target of a short squeeze.
In my opinion, the recent surge of BBIG stock was also sparked by Vinco’s use of two buzz terms that tend to excite meme-stock investors: blockchain and NFTs.
The rally, as Moadel pointed out, took the shares to a 52-week high of $12.49 on Sept. 8. Since the shares changed hands for just $2.40 on Aug. 20, that really was a monster jump.
The huge move by BBIG stock could indicate that meme-stock fans could still move equities through the beginning of this month.
On the other hand, the shares have truly cratered after peaking on Sept. 9 at that $12.49 level, tumbling nearly 50% in less than two weeks.
They trade today at around $6.30 today.
Fundamentals Are a Problem
Interestingly, the sharp downturn started in the same week that the federal unemployment bonus and the federal rent moratorium both expired. I believe that the expiration of these measures will badly hurt meme names like Vinco.
In fact, the waning of these stimulus measures could prevent meme stocks from staging epic rallies again anytime soon.
The rally was likely sparked by the company’s plan to spin off its blockchain business, Cryptyde, as InvestorPlace contributor Samuel O’Brient noted in his Sept. 8 column.
According to Vinco’s proxy statement, Cryptyde is expected to become a separate, publicly-traded company.
Vinco did not provide any information about Cryptyde’s size, financials or competitive advantages in the blockchain space. Moreover, many companies have entered the sector since blockchain became a prominent concept several years ago.
According to Moadel, Vinco’s spinoff includes NFT digital marketplace E-NFT.com, but many companies have entered that space as well.
Although the company stated that more than 1 million of its initial NFT album were purchased, without knowing the purchase price, it’s difficult to gauge the impact of those sales on BBIG stock or on the value of Cryptyde.
The Bottom Line on BBIG Stock
Meme-stock investors got excited because Vinco announced that it was spinning off a unit involved in the blockchain and NFTs, but these are crowded sectors.
There’s no sign that Vinco’s revenue from them is significant in any way, nor did the company disclose any competitive advantage that its subsidiary has in these areas.
In other words, just because Vinco is spinning off a subsidiary that is involved in two areas that excite meme investors — blockchain and NFTs — does not mean that the subsidiary will be very successful or that it is valuable.
At the beginning of the year, when meme investors were flush with cash, BBIG stock could easily have kept going and going and going. But now that the stimulus party is mostly over, the shares quickly crashed.
Without much stimulus to empower meme investors, I expect BBIG stock to continue crashing for the foreseeable future. Add to that the fact that the name still trading at a hefty 11 times trailing sales and that the valuation of its most valuable asset is murky, investors should sell the shares.
On the date of publication, Larry Ramer did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Larry has conducted research and written articles on U.S. stocks for 14 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Among his highly successful contrarian picks have been solar stocks, Roku, Plug Power, and Snap. You can reach him on StockTwits at @larryramer. Larry began writing columns for InvestorPlace in 2015.
