A few weeks back, Vinco Ventures (NASDAQ;BBIG) stock, an occasional favorite of the Reddit trading community, shot up in price yet again.
This latest wave of speculative frenzy with BBIG stock wasn’t as epic as the one experienced last August and September.
But from the start up to its peak, it did result in the shares in the company, which owns a grab-bag of digital businesses, up more than 100%. Now though, almost as quickly as it shot back up above penny stock levels (more than $5 per share), Vinco gave back nearly all of its recent gains.
Following this big fall, it’s understandable if you’re tempted to buy BBIG stock. After all, the company is moving closer to spinning off its Cryptyde unit. There’s also still big potential with its other key holdings.
To top things off, despite the declaration that meme stocks are over, this heavily shorted stock could see another influx of Reddit traders sending it higher once again. However, BBIG stock is still more of a dice roll than a solid investment opportunity.
Skipping out on shares right now is the better way to go.
BBIG Stock and Its Recent Bubble Burst
The short-lived run in Vinco Ventures stock earlier this month was an interesting development. As you likely know, meme plays like AMC Entertainment (NYSE:AMC) and GameStop (NYSE:GME) have been in free-fall.
However, whether it was due to a short squeeze, excitement over its spinoff plans or just the fact that it’s a smaller, less liquid stock, this most recent BBIG stock bubble burst. Traders still holding the bag since its last meme crash with it may have been able to sell into strength. They may be able minimize their losses, or perhaps cash out at a small gain.
Unfortunately, many others who dove it expecting a repeat of its incredible run five months back are now sitting on big losses. Even so, some of these new shareholders may be deciding to hold on. Others may be deciding to buy it after its moves back to just under $3 per share.
Why? Between the aforementioned spinoff, and the additional factors as previously discussed, it may appear as if this penny stock has potential to skyrocket again. The question is whether the potential is worth the high risk.
The Cryptyde Spinoff and Other ‘Catalysts’
The upcoming spinoff of its Cryptyde non-fungible token (NFT) unit is one possible driver of the BBIG stock rally earlier this month. Right now, though, it’s not giving much support to shares. Even as in recent days, there’s been an update about this long-awaited event.
As InvestorPlace’s Samuel O’Brient reported Jan. 27, Vinco made the spinoff plans official. Not only that, the company announced that, in conjunction with the spinoff, Cryptyde will raise $42 million from institutional investors, via both an equity and convertible debt offering.
The pending spinoff may have some investors interested in diving back into shares. There’s also the potential for BBIG stock to get squeezed again.
Besides these two short-term catalysts, there’s a longer-term one as well. That would be the potential for both of its other key holdings. I’m talking about video-sharing app Lomotif, which is very similar to TikTok, as well as AdRizer, a digital advertising platform. Nevertheless, it may not be wise to buy for these reasons.
With the spinoff, it’s a pure gamble whether this results in a mad dash back into shares. As for a short squeeze? I’ll admit it’s possible, but again this is something that’s tough to handicap.
Finally, with the longer-term catalysts? Before, I’ve talked about how Lomotif could become very valuable down the road, even if it fails to achieve TikTok levels of popularity. Still, what’s made me cautious about the stock continues to be a problem.
The company continues to be not very forthcoming with information. This includes a lack of clarity about its corporate structure, plus the dilutive impact of its issuance of warrants last year. These issues make it hard to tell whether the stock is overvalued or undervalued.
The Verdict on Vinco
Vinco Ventures’ latest meme wave has dissipated, as the stock again approaches $3 per share. As it returns to bargain basement prices, it may look tempting. That is, as a “buy the dip” sort of play.
However, taking a closer look, I wouldn’t say that is the case. It’s a gamble whether upcoming events like the Cryptyde spinoff will fuel its next breakout in price. Same goes for the possibility of a short squeeze.
With even its longer-term catalysts tougher to handicap, due to an incomplete dissemination of information, avoid BBIG stock for now.
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Read More: Penny Stocks — How to Profit Without Getting Scammed
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.