12 Jan Vinco Ventures: A highly speculative long-shot Investment!
Vinco Ventures, Inc. (NASDAQ: BBIG), a stock that was once a favorite with the reddit crowd, has been on a roller coaster ride with the stock almost reaching quadruple value in 2021, making it yet another entrant in the list of Meme Stocks. However, like most Meme stocks the Company is now nosediving from its record levels and raising concerns about issues such as stock bubble, overzealous trading, investor protection and market manipulation. BBIG stock was trading at $2.19 levels in August 2021 and shot to an all-time high of $12.49 in September 2021, climbing mostly due to a reddit-fueled rally.
Meme stocks do not necessarily have a fundamental reason underlying their popularity, besides the buzz generated on social media platforms, which is why they are risky and unpredictable. While it is clear that these temporary spikes are unrealistic and unsustainable over the long-run, there are some stocks that do offer an attractive upside in the long-run. Is Vinco Ventures a stock with potential or is it just hype? Read on to find out more!
Vinco Ventures Inc (NASDAQ: BBIG)
Market Cap: $319.37M; Current Share Price: 2.34 USD
Data by YCharts
Strength
Vinco Ventures strategy revolves around Buy. Innovate. Grow. The Company actively pursues acquisitions of strategic brands to add to its portfolio. In January 2021, the Company announced a reverse merger with Zash Global Media, which was brought to fruition in July, 2021. The combined entity is known as ZVV Media Partners and is co-owned by Vinco (50%) and ZASH (50%). The Companies acquired Lomotif, deemed to be a rival to TikTok and Kuaishou and one of the fastest growing video-sharing social networking platforms that has over 225+ million installations. The Company has set its sight on the Indian marketspace, where Tiktok is banned and which is likely to have nearly 450 million social network users in 2023.
The merger intends to create a “virtual Hollywood” that will use a combination of data, metadata and Internet of Things (IoT) to cater to the evolving demands from content developers, consumers and creators. The move is likely to help Vinco, which has been battling losses. With Vinco likely to be at the forefront as the parent company, which may improve its ability to raise capital and also participate in lomotif’s growth as it enters into newer markets.
In April 2021, the Company launched EVNT Platform, LLC. (DBA Emmersive Entertainment), a subsidiary which aims to disrupt the NFT market. The platform will acquire digital assets from Emmersive Entertainment, Inc. The Company intends to bring 3-dimensional full-scale E-NFTs to the market featuring top class musicians, actors and athletes. In September 2021, the Company launched the first NFT streaming movie soundtrack, for the movie “Karen”, which will be exclusively available on the e-nft.com platform.
In November 2021, the Company’s subsidiary Cryptyde launched a joint venture with Wattum Management namely CW Machines, which aims to simplify consumer ownership of BTC Mining equipment through use of smart contract technology.
Weakness
As per its financial results for Q3, 2021, the Company reported revenues of $2.23 million, a decrease of 11.5% from $2.52 million in Q3,2020. The decline was attributed to the decrease in sales of personal protective equipment (PPE) in the Edison Nation Medical division. This also resulted in a decrease in the gross profit margin to 31.4% from 40.3% in Q3,2020.
The selling, general and administration costs were $25.9 million, out of which $6.2 million was stock based compensation, $5.6 million was due to legal and professional fees and $5.1 million and $6.2 million were operating expenses of ZVV and Lomotif.
The net loss stood at $542.5 million, or ($7.59) per basic and diluted share, as compared to $2.8 million, or ($0.30) per basic and diluted share for the same period last year. The increase was attributed to the issuance of warrants in Q3,2021, and the change in estimated fair value of outstanding warrants as of September 30, 2021. Furthermore, the loss also reflects costs associated with Lomotif ‘s transactions and operations.
At the end of Q3,2021, the Company had Cash, cash equivalents, and restricted cash worth $149.9 million.
Opportunity
NFT stands for Non-Fungible Tokens are unique, non-replicable digital tokens stored on a blockchain network. These can be any digital asset such as drawings, music, gaming merchandise, movie memorabilia, simple trading cards, video games or even digital art. There is a veritable craze for NFT’s as more and more companies are taking plunge into the NFT space.
They can be bought and sold online just like cryptocurrencies and involve a digital public record of transactions just like a blockchain. However, they are not “Fungible” in the sense that the piece being sold is unique and non-replaceable, unlike typical transactions on a blockchain that can be exchanged for a similar equivalent transaction. This is what lends exclusivity and a sense of pride in ownership to it.
NFT’s are bought and sold on specialized platforms such as OpenSea, Atomic Spaces, Solanart, Grimes Choice, Rarible and Nifty Gateway among many others. The sale of an NFT does not involve the transfer of a physical asset, but mostly a change in the ownership through a certificate that is registered on the blockchain. The certificate itself is stored in a digital wallet and can take the form of a printed code on paper. From virtual kittens to Pokemon cards, anything can be bought and sold through NFT’s. In March 2021, in a first-of its kind auction at Christie’s, a collage by digital artist Mike Winkelmann, known as Beeple, was sold for a whopping $69 million.
Similarly, another video by Beeple sold for $6.6 million, some of the more interesting purchases include a tweet by the founder of twitter for nearly $3 million, digital pet rocks, and virtual land. There are multiple communities dedicated to NFT’s such as CryptoPunks, Pudgy Penguin or the Bored Ape Yatch club.
According to a report by DappRadar, the NFT space clocked $23 billion in trades in 2021. The growth is driven by leveraging intelligent computational processes and adoption of NFT by brands like Nike, Coca-cola, Gucci and Adidas, which add exclusivity to the tokens. The floor market cap of the Top 100 NFT collections was at $16.7 billion. These figures are a testimony to the growing popularity of the tokens and a precursor to its potential in the coming days.
Threat
The Company may fail to successfully execute its expansion plans for Lomotif and garner any substantial market share. If it manages to catch the fancy of users in established and emerging markets, then it can fill the gap left behind by Tiktok, especially in countries where it is banned. However, failure to do so will relegate its name to multiple such now-defunct video sharing apps.
Vinco may also fail to capitalize on the craze for NFT and crypto-related offerings. The Stock price is highly volatile with a jump to a high of $12.49 on September 8, 2021 to now trading at under $3. The stock has generated considerable interest in the retail segment and caught the fancy of the wallstreetbets stocks community. The short interest in the Company is close to 30.38 million, indicating a significant fundamental risk for the Company.
Key Takeaways
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
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References
https://www.theverge.com/2021/3/11/22325054/beeple-christies-nft-sale-cost-everydays-69-million
https://dappradar.com/blog/2021-dapp-industry-report
https://www.nasdaq.com/articles/cryptocurrency-mining-could-be-the-key-to-success-for-vinco-ventures
https://www.nasdaq.com/market-activity/stocks/bbig/short-interest
https://www.nasdaq.com/market-activity/stocks/bbig/short-interest
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