If you are a limited partner of the hedge fund, you can thank your lucky stars that BBIG only represents a tiny portion of its $9.8 billion portfolio.
Who is Hudson Bay Capital and what is it doing with a ragtag outfit like Vinco? Quite honestly, I couldn’t tell you. However, one thing I can say with great certainty is that the hedge fund’s Chief Executive Officer Sander Gerber is not losing sleep over it.
Here is why.
BBIG Stock Down 83% Since 52-Week High
Over the past year, BBIG stock has lost 10.6% of its value year-to-date. However, as recently as September 2021, it was trading at a 52-week high of $12.49 and had a market capitalization of $1.7 billion.
Based on Hudson Bay Capital’s third-quarter 2021 13F, its Vinco stake was worth $50.4 million, or $5.74 a share. That is based on 8.81 million shares held by the hedge fund as of Sep. 30, 2021. That represented 0.7% of Hudson Bay Capital’s $7.4 billion portfolio.
However, if you exclude many of the hedge fund’s convertible notes held, Vinco was one of its largest positions. It also held a ton of special purpose acquisition companies (SPACs). They’ve become popular with hedge fund investors as a safe way to park money. But I digress.
InvestorPlace’s Ian Bezek recently discussed how Vinco Ventures Is Still a Confusing Mess. My colleague was talking about all the company’s moving pieces not adding up to profits. He believes, as I do, that Vinco has little chance of success. He wrote:
“Vinco Ventures is working on a lot of interesting projects. However, the odds of Vinco ultimately succeeding are low. Anytime you see a company change its name, alter its business model, and being led by executive who were involved with failed penny stocks, the company’s odds of rewarding its shareholders aren’t good.”
When I last wrote about Vinco in January, I suggested that its stock could still be expensive under $1, so I get where my colleague is coming from. Vinco is a dog with fleas.
Here is how I concluded my commentary about Vinco:
“The lack of focus and a relatable story will ultimately kill BBIG stock if it hasn’t already. It’s cheap for a reason. I would not touch this falling knife. It’s not a business. It’s an exercise in paper shuffling.”
The Hudson Bay Pieces Don’t Add Up
As I look through Hudson Bay Capital’s last three 13F filings, I’m left scratching my head.
In Q2 2021, it had a call position on Vinco, representing 210,500 shares. It also had a put for 90,000 shares and 185,994 shares. In Q3 2021, as I stated earlier, it held 8.81 million shares, and finally, in Q4 2021, it had 735,251 shares plus warrants to buy an additional 14.4 million shares.
However, last July, the hedge fund bought a $120 million senior secured convertible note from the company — discounted to $100 million — with a $4 a share conversion. You can find most of the details from its September 2021 filing.
If you think its wheeling and dealing is tough to follow, I would have to agree. To me, it all seems like a garbled mess.
I’ll need to see more concrete financial paperwork from Vinco and Hudson Bay Capital before thoroughly evaluating what it means for the company.
I wouldn’t invest in Vinco for the simple reason that it has too complicated a financial structure. This suggests that Hudson Bay Capital ought to take Vinco private until such time as its financials justify returning it to the public markets.
Fortunately, for Hudson Bay Capital’s limited partner investors, the stakes are very low with Vinco relative to the hedge fund’s total assets. It can afford to take a flyer on the stock. Most regular investors can’t.
I continue to recommend readers stay away.
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Read More: Penny Stocks — How to Profit Without Getting Scammed
On the date of publication, Will Ashworth 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.