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Vinco Ventures (NASDAQ:BBIG) has been facing numerous challenges, including the company fending off a hostile takeover which ended up with a restraining order being put in place, was directed to accept a CEO by court order, hasn’t issued any earnings reports from the end of Q1, now has 3 co-CEOs, received a Deficiency Notice from Nasdaq concerning filing its quarterly report on form 10-Q, and after recently falling under $1.00 per share, is in danger of receiving another notice from Nasdaq concerning that issue.
My conclusion is this company is difficult to analyze at this time because there are no recent earnings reports to look at. That’s significant because the company suffered a heavy net loss that its balance could struggle to compensate for, depending on what the unreported numbers are for the last reporting period.
In this article we’ll look at the underlying challenges facing BBIG, and why investors should at the very least wait until the company’s next earnings report in order to get some clarity on where things stand before considering taking a position.
The restraining order
A press release by Vinco Ventures on August 10, 2022, revealed the context of the temporary restraining order it was granted by a district court Judge of Nevada. Here’s what it stated:
On August 5, 2022, Vinco Ventures, Inc. (BBIG) (“Vinco Ventures,” “Vinco,” or the “Company”), a Nevada corporation, was granted a temporary restraining order (the “TRO”) from the district court Judge of Nevada (District Court Clark-County, Nevada Case No: A-22-856404-B.) against Theodore Farnsworth, Lisa King, Roderick Vanderbilt, and Eric Noble (collectively, the “Farnsworth Group”). The Farnsworth Group is “enjoined from holding themselves out internally or externally as employed by the Company or acting on its behalf in any capacity; is enjoined from accessing Company’s premises or servers; and is required to relinquish control, or to direct those persons working with or under them to relinquish control, over the Company’s SEC filing passcodes and cooperate to return SEC codes to the Company’s dominion and control under John Colucci and return all Company personal devices, passwords, servers, documents (whether in paper or electronic format), payment and payroll systems, and emails and email servers related to any business of the Company and its affiliates.”
While that provides the framework for the TRO, what the company explains next is concerning to me. It would suggest not just an attempted takeover in the sense of making a bid for the company or building coalitions to take majority control, rather, it gives the impression of unethical activity rather than an actual takeover.
It’s explained this way:
In the process of this attempted hostile takeover attempt, the Farnsworth Group has ignored legally taken Board actions, made inaccurate SEC filings, posted inaccurate and misleading information on social media sites and YouTube, refused to leave after being fired by the Board, blocked the Company’s SEC filings, held illegal board meetings, blocked emails, taken over administrative rights on email and other systems, taken over HR systems and blocked a reduction in force, put the Interim CEO and CFO on “administrative leave,” and harassed and bullied staff to get access to bank accounts, payroll and payment systems.
If the Farnsworth Group were not representatives of the company, how did they allegedly obtain passcodes and other proprietary data that allowed them to take the actions they did? How could they allegedly bully staff in order “to get access to bank accounts, payroll and payment systems” if they weren’t considered to have some type of legitimate authority? These are questions potential investors should ask themselves.
It seems on the management side things have settled down for now, but investors should carefully watch how the three co-CEOs work together in the months ahead.
With the deep challenges the company is facing, they must work in unison if the company has any chance of improving its performance.
I wish I could give you Vinco Ventures’ recent numbers
As a result of falling behind in its reporting requirements, we have no idea where BBIG stands today.
For example, in the first quarter, Lomotif have over 225 million people that downloaded and used Lomotif. As of the first quarter the service was enjoying growth momentum. It’s vital that investors find out whether or not the momentum has continued on, or growth has slowed.
Concerning its balance sheet, it was pretty solid at the end of Q1 2022, with cash and cash equivalents, including restricted cash, surpassing $210 million. At the time, the company’s cash holdings reflected over 50 percent of its overall market cap; that of course suggests the company could be undervalued.
With the acquisition of AdRizer, revenue in the reporting period was $11.5 million, up close to 350 percent. Where is it today? We have no idea.
The good news in all of this is, if BBIG still has a solid cash position near what it was in the first quarter, it does have time to ride out the weak economic conditions it’s operating in, along with the internal struggles at the leadership level.
Lomotif has the most long-term potential
Lomotif is an app that allows creators to design videos, which with built-in editing and mixing capabilities, allows users to express themselves in a wide variety of ways. It has a similar feel to TikTok and has been growing rapidly. It can be used on not only TikTok, but also on Facebook, Instagram and Twitter.
As of the first quarter, it had over 225 million people download and use the app. One competitive advantage it has against TikTok is it has a presence in India via its partnership with Socialkyte, which TikTok is banned from operating in. Lomotif stated it garnered over 40 million active users in India in only a few months.
The company decided to tackle the Indian market by focusing on everyday users rather than some of the livestreaming events like Shaq’s Fun House and others, that helped boost its user base in the U.S. in particular.
While I don’t see Lomotif having near the user base TikTok has, I do believe it has the potential for some significant upside in the future, assuming it’s able execute on its business plan and continue to grow its user base in the large Indian market.
At the macro level, like all tech companies, BBIG has taken a big hit as a result of the actions taken by the Federal Reserve to curb inflation. This results in discounted free cash flow which has brought about the sell-off that has disproportionately pummeled tech companies and other risky assets.
Once inflation comes under control and the Fed signals it’s going to ease up on interest rate hikes, this will bring back a lot of investors wanting to take advantage of the rebound in the tech sector. BBIG should participate in the renewed interest of investors in potential high-growth stocks.
If Lotomif takes off and investor sentiment improves, BBIG is very likely to return to sustainable growth. I don’t believe that’s going to happen anytime soon, but things will be much clearer at the end of 2022 and early 2023.
Conclusion
In order for BBIG to turn things around it must show that its three co-CEO management team is able to not only work together well but execute the business plan it has in place.
Other major concerns are the ongoing weak global economy, high interest rates that lower the outlook for future free cash flow, the Nasdaq notice concerning its Form 10-Q, and the company exposing itself to another Nasdaq notice as the result of its share price falling under $1.00.
While the company had plenty of cash on hand as of the end of the first quarter, investors won’t know where things stand until the company reports its earnings. Nonetheless, if Nasdaq gives the company an extension (assuming it seeks one), it could be months before there is any visibility concerning the company’s performance. This is important because we need to know if the company is maintaining momentum, or if its growth trajectory has bogged down.
For that reason, for now, I think investors should consider BBIG only as a meme play that a trader gets in and out of quickly. If its share price continues to plummet, it could become a short squeeze that would reward investors very well.
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