Vinco Ventures (NASDAQ:BBIG) announced last month that it would postpone its special stockholders meeting to July 26 after originally being scheduled for July 1. The company extended the date to provide stockholders with more time to cast their vote. BBIG stock is down about 40% year-to-date and hovers around $1.
On top of that, Vinco is currently dealing with a Nasdaq noncompliance issue. Vinco appointed John Colucci as interim co-CEO last week. However, Colucci also serves on the company’s board. This puts the board in noncompliance with Nasdaq requirements. The Nasdaq requires a company’s board to be comprised of a majority of independent directors. Colucci’s appointment shifts the board so that a majority of directors are directly involved with the company. The board Chairman has recommended that Colucci step down as director for the next 60 days while the board works to find a replacement.
With that in mind, let’s take a look at what will be voted upon at the stockholders meeting.
Dear BBIG Stock Fans, Mark Your Calendars for July 26
Before the meeting, BBIG stockholders will be able to vote on two changes of which the board is in favor in. These two changes are:
- To approve an amendment that would increase the number of shares of common stock outstanding from 250 million to 750 million.
- To approve an amendment that would increase the number of Preferred stock from zero to 30 million.
Shareholders were also given the vote to adjourn the meeting to a later date from the original July 1 date. The meeting was subsequently postponed to July 26 on June 29.
So, why exactly does Vinco want to increase its number of shares outstanding by 500 million shares? Oftentimes, companies issue new shares to raise capital to fund projects. In addition, Vinco may want to reward its employees with employee stock options (ESOs). When exercised, ESOs convert into new shares.
Still, if approved, the number of shares outstanding would increase by 200%, diluting current shareholders. It’s likely that Vinco would do this over a stretch of time instead of all at once.
Meanwhile, Vinco would like to create 30 million preferred shares. Preferred stockholders have a higher claim to distributions, like dividends, then common stockholders. In the event of a bankruptcy or liquidation of the company, the former, preferred stockholders also will have higher claim of assets than, the latter, common stockholders. The tradeoff is that preferred stockholders usually have none or limited voting rights.
On the date of publication, Eddie Pan did not hold (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.