Imagine you are on a ship traveling in extremely foggy weather. You feel disoriented, anxious and maybe scared. Definitely lost. To me, Vinco Ventures (NASDAQ:BBIG) perfectly fits this description. BBIG stock is simply disorienting for investors.
In my previous article about BBIG stock, I talked about the company’s disappointingly vague business model. I also argued that its “B.I.G. strategy” is destroying book value per share. The acronym for the strategy stands for “buy, innovate, grow.”
All told, there are just too many reasons to avoid Vinco Ventures at this point. Investors shouldn’t be fooled by the stock’s low price of under $3, either.
BBIG Stock: Recent News Does Not Add Value… Yet
Back in late October, InvestorPlace’s Samuel O’Brient wrote an article with a lot of valuable information on what moves BBIG stock. But the most important detail? The change of the record date for Vinco’s Cryptyde spinoff dividend, which has been postponed to late December of this year. O’Brient stated the following:
“The reasoning behind this further delay is to ‘allow for the spin off to be a tax free exchange’ and for all shares to be ‘free trading at the time of dividend.’ The company believes that this will be in the best interest of all current shareholders.”
That may or may not be so. Nevertheless, other news has not been so shareholder-oriented. For instance, Vinco is planning to change its name to ZASH, but that does not add value to BBIG stock shareholders. It’s just a business decision related to restructuring.
More importantly, though, Vinco continues to be very confusing when it comes to its core operations. It’s hard to pinpoint exactly what the company wants to achieve. In a recent presentation, for example, Vinco mentions both the Cryptyde spinoff and Lomotif, its part-owned Tik Tok-like social media platform.
The presentation gives investors pro forma examples meant to illustrate full warrant execution. The document also mentions that investors may choose to not exercise these warrants. But the presentation doesn’t supply any other important financial information, projections or real data on performance otherwise.
I suppose the company does offer a brief explanation of what Cryptyde is. It notes that the spinoff “is a selective acquisitions company focused on leveraging blockchain technologies to disrupt consumer facing industries.” The document also refers to “the E-NFT marketplace.” But past the fact that it deals with blockchain, what exactly is Cryptyde supposed to do? Or, more importantly, how does it add value for BBIG stock shareholders?
Widening Net Losses and the Bottom Line
As you can see, investors have been pretty much left in the dark. Even when one turns to the fundamentals in Vinco’s third-quarter earnings report, it feels like foggy weather. Some of the Q3 financial highlights include the following:
- For the period, cash, cash equivalents and restricted cash came to $149.9 million
- In Q3, revenue decreased a little over 11% from $2.52 million to $2.23 million in Q3 2020, “driven primarily by the decrease in sales of personal protective equipment in the Edison Nation Medical division.”
- Net losses came to $542.5 million, or a loss of $7.59 per basic and diluted share. That’s compared to a net loss of $2.8 million or 30 cents per basic and diluted share in Q3 2020.
- The company stated that “the increase in the net loss is primarily due to the issuance of warrants during the quarter and the change in estimated fair value of outstanding warrants […] as well as the costs associated with the Lomotif transaction and the results of its operations, which were consolidated into the Company’s financial results for the first time this quarter.”
To me, there are at least four fundamental factors that are very worrisome for BBIG stock. Data from SimplyWallSt shows that Vinco has seen some disappointing trends. First, earnings have declined by 107% per year over the past five years. Additionally, shareholders have been substantially diluted in the past year. Plus, Vinco Ventures has reported a negative shareholders equity. Finally, the company is unprofitable. For the nine months ended Sept. 30, it reported a net loss from continuing operations of $787.3 million. The net loss for the same period in 2020 was $7.9 million.
All in all, I am unsure what Vinco is trying to achieve with both Lomotif and its blockchain venture. What I am certain about, though, is that it’s better to avoid BBIG stock currently, from a fundamental analysis perspective.
Can Lomotif bring in revenue growth and profits? I’d be glad to analyze the company’s real financial performance once we have a clearer picture.
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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.
Stavros Georgiadis is a CFA charter holder, an Equity Research Analyst, and an Economist. He focuses on U.S. stocks and has his own stock market blog at thestockmarketontheinternet.com. He has written in the past various articles for other publications and can be reached on Twitter and on LinkedIn.