Putting it simply, Vinco Ventures (NASDAQ:BBIG) is the kind of penny stock that’s a hard pass in normal market conditions. But, of course, what we have seen play out in the past year has been anything but normal. With phenomena like “meme stock madness,” rolling the dice on something like BBIG stock has become a profitable strategy.
Yet, as you likely know, that’s been changing. It’s still up for debate whether the aforementioned investing/trading trend still has runway. But there are some signs this trend is winding down. Even if it does continue, and “meme stocks” bounce back, who’s to say this one goes along for the ride?
Yes, as I broke it down in my last article, there’s something that could send it soaring, whether or not the Reddit stocks trend continues. That would be the possibility for renewed buzz, as more become aware of the potential of one of the company’s recent acquisitions.
Yet, looking at the details, or lack thereof? Any sort of pop will at best be short-lived, before the vocal short-sellers bring its red flags to light. At the end of the day, as this is little more than you’re garden variety penny stock? Consider “avoid” the keyword for this situation.
Could the Hype Return for BBIG Stock?
After July’s “meme stock” crash, can this trend come back for a third wave? There are some signs that say yes, and some signs that say no. The thesis laid out by Barron’s, that the “meme stock trade is far from over,” may still play out. Millennial and Generation Z took to retail stock trading during the pandemic, and both generational cohorts could continue to pursue this strategy. It may ebb-and-flow like it’s done twice before, but that doesn’t rule out the chances of a third speculative wave.
Yet, there’s the “lack of new money” counter argument made by skeptics like Michael Burry of Big Short fame. Without new participants willing to chase the “meme stock” trend, it could continue to collapse. In turn, sending the stocks it took “to the moon” down with it. So, who’s right and who’s wrong? Again, only time will tell.
It’s also up for debate whether BBIG stock in particular would benefit from the next possible wave. Check out a tracker of the most talked-about stocks on Reddit’s r/WallStreetBets, and it ranks low on the list. The names near the top, including top meme plays like AMC Entertainment (NYSE:AMC) and GameStop (NYSE:GME), along with short-squeeze plays like Clover Health (NASDAQ:CLOV) and ContextLogic (NASDAQ:WISH) appear to be ones that’ll capture the most attention (and gain the most) if a “third wave” pans out.
Now, this trend alone isn’t the only thing that could send Vinco Ventures stock soaring again. A possible surge in hype from its latest M&A deal alone could be enough to move the needle. But if you scrutinize its sketchy details, it starts to look like less of a game changer.
Recent Acquisition Is Hardly the Deal of the Century
The last time I discussed BBIG stock, I broke down how the stock could surge again, independent of the “meme stock” trend. How? Based upon possible buzz around its acquisition of aspiring TikTok competitor Lomotif.
My theory at the time was that the company could promote the narrative that buying it is like “getting into the next TikTok early,” which could attract a mad dash into its shares. Thinly traded compared to other “meme stocks,” this could result in a a dramatic move higher.
Yet, based upon recent commentary, it’s clear this is far from the deal of the century. Late last month, InvestorPlace’s Mark Hake pointed out the unanswered questions about the transaction. These include limited details about its current outstanding share count, as well as a lack of confirmation of the Lomotif purchase price. With this, it’s difficult to assess whether BBIG stock is cheap or overvalued at today’s prices (around $3.30 per share).
I wouldn’t be surprised if this becomes the next target of a Hindenburg Research-type vocal short-seller. A temporary bubble could form if investors hop aboard thinking this is the next TikTok. But said bubble could quickly get popped, once scathing “short reports” start making the rounds on Twitter (NASDAQ:TWTR) and financial media outlets.
An Irrational Rally May Be Possible, but Still a Name To Avoid
It’s not getting much attention now on r/WallStreetBets. But depending if more buzz arises from this company owning a TikTok-in-the-making, shares stand to rally once again. Yet while another irrational rally may be possible, the (lack) of details with this deal signal it’s not best to gamble on this situation.
Bottom line: Stay away from BBIG stock.
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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.
Thomas Niel, contributor for InvestorPlace.com, has been writing single-stock analysis for web-based publications since 2016.