After months of wait, Vinco Ventures (NASDAQ:BBIG) is finally completing its spinoff of its cryptocurrency/non-fungible token (NFT) unit, Cryptyde (which will have the ticker symbol “TYDE”).
Shareholders of record on May 18 will receive one share of TYDE stock for each 10 shares of BBIG stock held. The distribution will complete on May 27. Upon announcing a spinoff date earlier this month, shares popped on the news. Speculators who dived into it on the news may have thought that a “short squeeze” was in store. Unfortunately, they’ve instead found themselves, with the stock’s move from around $3.25, back down to around $2.50 per share.
Worse yet, more price declines may lie ahead for this digital holding company. Especially once the spinoff happens later this month. How so? The Cryptyde spinoff was the only exciting thing Vinco has had going for it in recent months. As I wrote last month, its most recent earnings report was hardly anything to write home about. The hype surrounding one of its other key holdings, an indirect 40% stake in Lomotif, a TikTok-esque video sharing app, has faded.
Chances are that the investors still holding the stock today are in it for the Cryptyde spinoff catalyst. Once this catalyst finishes playing out, they may hold onto their TYDE shares. Even as the current state of the crypto market signals it will perform poorly.
With BBIG stock, however, they may decide to quickly cash out post-spinoff. In turn, with the retail crowd less active in it, the stock will begin to move more toward a price more in line with fair value. That’s a big problem, given the stock, while seemingly cheap at today’s prices, is overvalued.
With the upcoming spinoff, we can assume it will have around a $490.8 million market capitalization post-Cryptyde. Put simply, there’s little to back up this valuation. Although it has a large cash position ($187.6 million), it also has a $198.6 million derivative (warrant) liability. Considering the big drop in valuations for early stage ventures due to rising interest rates? It’s debatable whether the company’s holdings like Lomotif and recent acquisition AdRizer are worth their respective purchase prices. Through a 50/50 joint venture with ZASH Global, it paid $110 million for the Lomotif stake. It paid $38 million to buy AdRizer.
Not only that, there’s the risk of further heavy dilution. The company’s share count zoomed from 14.47 million to 150.1 million between 2020 and 2021. It may just well decide to raise more money on dilutive terms, with little regard for its impact on shareholder value. Put post-Cryptyde selling pressure, a rich valuation, and risks like more dilution together, and a lot of signs point to even lower prices ahead for BBIG stock.
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.
