Vinco Ventures Confounds Investors With Its SPAC-Like Narrative

Stocks to sell

Easily my least favorite stock to cover, Vinco Ventures (NASDAQ:BBIG) is the bane of my existence. While some companies can be rather obfuscating regarding what they actually do, Vinco really takes the cake. It’s a self-inflicted stun grenade — or flashbang to use special operator parlance — one that leaves BBIG stock staggering in a pit of confusion.

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I’m not the only one that feels this way. My InvestorPlace colleague Ian Bezek acknowledges the same, proclaiming that it’s a “complicated company. Vinco is planning to merge with ZASH Global, it is acquiring digital advertising service AdRizer and it is spinning off its crypto business, Cryptyde. As a result of all these moves, BBIG stock has been quite volatile.”

Volatile? I’ll say. On a year-to-date basis, BBIG stock isn’t too putrid, shedding “only” about 13%. Given the circumstances of soaring consumer inflation, geopolitical flashpoints and the recovery process — and lingering tensions — from the coronavirus pandemic, losing 13% isn’t a call for concern.

What is a call for concern, though, is dropping nearly 77% over the trailing six months. That’s going to draw plenty of attention toward BBIG stock — much of it negative.

Still, this being the new normal for both society and the capital market, is it possible that BBIG stock could jump higher as a speculation trade — you know, the whole concept of buy low, sell high which has become a meme?

In the wacky world we’re living in now, I’m not going to dismiss any opening as impossible, no matter how narrow. But this time around, I’m not terribly convinced that Vinco Ventures will finds its way north on a sustained basis.

It all has to do with reputational damage.

SPAC Fever Hurting BBIG Stock

By now, everybody’s seeing the devastation of Virgin Galactic (NYSE:SPCE), one of the most popular business combinations that occurred via a special purpose acquisition company. Since the January opener, SPCE is down around 44% and over the trailing 12 months, it’s hemorrhaged approximately 72%.

While I’m not equating BBIG stock to a SPAC, the point is these shell companies are relatively complicated and somewhat exotic instruments. Rather than an enterprise launching its own initial public offering, a blank-check firm instead becomes public and merges with a target, thus offering a backdoor entrance to a proper exchange.

In the meantime, there are warrants and other dilutive elements that can surprise investors not well versed with SPACs. So far, the overall message is becoming clearer. You must perform your due diligence because many SPACs are simply instruments to profiteer from unsuspecting retail buyers.

Again, while I’m not suggesting that BBIG stock is another SPAC play, the two are similar in the sense that they feature complex business structures that have so far left those who bought at elevated valuations holding a bag of the stinky stuff.

Further, as it becomes apparent that these types of convoluted investments don’t have retail shareholders’ interest in mind, they may lose interest through reputational damage. That’s the concern I have with holding Vinco for the long term; eventually, regular folks wise up and they move onto more stable or proven ideas.

And as Bezek and my other colleagues have noted, Vinco isn’t doing itself any favors by facilitating multiple disparate acquisitions and other dealings without an apparent focus on profitability. As I said, regular folks are wising up to such shenanigans.

No Time for Risk-on Assets

Another factor that will likely hurt BBIG stock moving forward is that outside circumstances don’t favor highly speculative ideas. Heck, even many of the vanguard blue chips are facing pressures due to the dual uncertainties of rising prices and geopolitical conflicts.

Of course, at the end of the day, people have the freedom to do what they want. But in my view, the smart play would be to watch Vinco Ventures from the sidelines.

On the date of publication, Josh Enomoto 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 Publishing Guidelines.

A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.

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