Even Under $3, Vinco Ventures is Still Risky

Vinco Ventures (NASDAQ:BBIG) has had a wild year. The company was formed near the end of 2020, when a subsidiary, Honey Badger media, merged with Edison Nation, which was previously listed on the Nasdaq. The combined firm became Vinco and had the mission to “Be Big”. In this case, big is an acronym that stands for buy, grow, and innovate. That explains the origin of the BBIG stock ticker, as well.

photo of Lomotif app download page on a smartphone
Source: shutterstock.com / Postmodern Studio

Since then, Vinco has certainly attempted to execute on the be big strategy. It has pursued a variety of business ventures in various fields such as cryptocurrency, advertising, and social media.

To date, Vinco hasn’t achieved much success. While BBIG stock has been volatile, operating results continue to be uniformly uninspiring. That, plus the slumping interest in meme stocks more generally, has led to the crushing decline of Vinco’s share price in recent weeks.

Bad Q3 Earnings For BBIG Stock

Ostensibly, Vinco Ventures has been declining due to its poor Q3 earnings. Our Thomas Niel has all the details. In short, Vinco generated just $2.2 million in revenues, which was actually down year-over-year. Meanwhile, the company lost $542 million, though this was primarily due to non-cash charges related to warrant accounting.

Regardless, Vinco certainly isn’t a strong fundamental company today. Investors are hoping on future improvements from the company, rather than betting on what the firm is today. However, a deeper look shows that the future outlook is also rather cloudy.

Lomotif: Still Searching For A User Base

Vinco’s most important asset is its majority ownership stake in TikTok rival Lomotif. This is a site that allows users to share short-form content. Given the regulatory concerns around TikTok, there’s potentially a good market opportunity for a TikTok rival. However, Lomotif isn’t anywhere near TikTok’s level today.

CEO Lisa King made this point in Vinco’s most recent conference call. Ironically, Vinco hired a bunch of influencers from other platforms such as TikTok to post content on LoMotif. This generated a substantial amount of traffic, and led King to say that: “Lomotif is on its way to becoming a recognizable brand in the U.S. This made us believe that Lomotif has the potential of becoming a leading content platform.”

That’s what you’re investing in right now. It’s not a recognizable brand in the U.S., but it may become one in the future. Nor is it a leading content platform yet. But it has potential, according to management.

Potential is great and wonderful, but the actual product isn’t there yet. Perhaps it will get there, but more likely it won’t. For every successful social network, there are ten that quietly disappeared with hardly a trace.

Bulls can contend that Vinco holds other assets as well. It recently acquired an advertising business which may form some synergies with Lomotif. There’s also a non-fungible token (NFT) operation, though Vinco is looking to spin that off in 2022. Still, it’s hard to point to anything concrete as a gem that would make BBIG stock turn around.

BBIG Stock Verdict

Previously, I’ve been negative on BBIG stock. Back in August, I warned readers about Vinco management’s history, namely its involvement in MoviePass, a short-lived movie ticket service that burned investors royally. Vinco has the same signs; an unusual business plan, a lot of financial wheeling and dealing, and far more hype than actual results to point to.

To be fair, as a short-term trade, that sort of model can work. Clearly, BBIG stock popped from $4 to $10 this fall even with all the red flags around the business model. There’s a lot here to appeal to meme stock traders.

However, it’s really hard to see this business being much of a long-term success. BBIG stock’s massive decline over the past few weeks highlights these risks. Certainly shares aren’t quite as risky under $3 as they were at $10 a few weeks ago. Still, this thing could keep dropping — ultimately potentially even to zero — if Vinco doesn’t manage to find a sustainable business model. Even at this sharply reduced price, Vinco remains a straight-up gamble.

On the date of publication, Ian Bezek 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.

Ian Bezek has written more than 1,000 articles for InvestorPlace.com and Seeking Alpha. He also worked as a Junior Analyst for Kerrisdale Capital, a $300 million New York City-based hedge fund. You can reach him on Twitter at @irbezek.


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