Avoid Vinco Ventures Despite Its Undervaluation

BBIG stock - Avoid Vinco Ventures Despite Its Undervaluation

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Vinco Ventures (NASDAQ:BBIG) has plunged 74% over the last seven months. BBIG stock is currently trading near its 52-week low. Management’s failure to maintain transparency has been the primary reason for the adverse price reaction.

Last year, BBIG stock acquired Lomotif, a video sharing social networking platform whose app has been downloaded by more than 225 million users globally.

Although the venture looks attractive, investors seem to be uncertain about the value of this deal. There seems to be a missing piece about the company’s number of shares outstanding after the deal. Also, no information has been shared about Lomotif’s operational performance yet.

As the basic numbers such as revenue, app subscribers and cash burn are missing, no conclusion can be drawn about its future prospects.

Another major event is management’s intention to foray into the digital marketing and artificial intelligence (AI) spaces. The company recently acquired AdRizer for $38 million in cash and 10 million in stock.

AdRizer’s technology platform, Cortex, is used to analyze data on a real-time basis for digital advertising and programmatic media buying. Although the deal is expected to benefit Lomotif, the price paid for acquisition seems to be at premium.

Further, considering the company’s loss of approximately $787 million during the nine months ended Sept. 30, 2021, the decision to acquire seems concerning. The company might have to resort to an external source of financing. Given the rising interest rate environment, Vinco Ventures will not be able to secure funds at reasonable price.

The only catalyst supporting BBIG stock seems to be its decision to divest its ownership interest in Cryptyde. It is the company’s crypto business unit based on blockchain technology. Vinco Ventures aims to relaunch Cryptyde as a separate entity that will trade under the stock symbol TYDE.

All BBIG stock holders will receive one share of TYDE stock for every 10 shares they own. The newly formed company will focus on Bitcoin (BTC-USD) mining services, Web 3.0 products and consumer packaging.

The company has yet to report is fourth-quarter 2022 results, at which point its performance can be evaluated. Given the complexities that its business is facing, I would not suggest investing in BBIG stock.

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On the date of publication, Sakshi Agarwalla 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.

Sakshi Agarwalla has more than eight years of experience writing equity research reports and preparing financial models for companies across various industries, as well as writing newsletters and financial articles. Recently, she assisted her Fund manager in executing trades, preparing weekly, monthly NAVs and writing newsletters. She has a postgraduate degree in finance and has completed CFA.

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