Stocks to sell

Vinco Ventures Doesn’t Look Any Better After This M&A Announcement

Vinco Ventures (NASDAQ:BBIG) stock began last week at $6.01 and this week just a hair over $5.

Source: Shutterstock

The loss was despite the announcement that ZVV Media Partners LLC and Zash Global Media had entered into a letter of intent to buy AdRizer LLC for $108 million in cash and stock. 

Vinco and Zash Global Media each own 50% of the ZVV Media Partners joint-venture.

You would think a $100 million acquisition would be a big deal for Vinco shareholders. 

After all, based on its Oct. 5 filing, Vinco has 117.6 million shares outstanding and a market capitalization of $589 million. This means 50% of the deal ($54 million) represents about 9.2% of its market cap.

Perhaps AdRizer isn’t a great business, but investors either don’t like the move or don’t understand it for whatever reason. 

I’ll look at both angles. 

AdRizer Adds $31 Million to the Top Line

AdRizer’s website says they are “innovators in the world of AI-driven advertising analytics and programmatic media buying.” 

Perhaps it will become the next great advertising company alongside The Trade Desk (NASDAQ:TTD), up more than 3,833% since its IPO in September 2016. 

That’s a tough comparison. After all, AdRizer has a run rate of $62+ million in revenues. TTD has a run rate of $1.04 billion.

In 2015, before it went public, its annual sales were $113.8 million, which suggests AdRizer’s got a couple of years before it can get close to The Trade Desk’s 2015 results. 

So, being a glass-half-full kind of person, I’ll allow that AdRizer’s got a shot at greatness. 

Assuming AdRizer meets its run rate projection, Vinco’s 50% share is worth $31 million in annual revenue.

Vinco has TTM sales of $10.5 million, according to Morningstar.com. So, the addition of AdRizer potentially increases its overall sales three-fold with the completion of this deal.

And all for just $25 million in cash and the rest in ZASH common stock.

“We will now be able to monetize within our own internal platform. Not only will AdRizer continue to do its core business with external clients and grow aggressively, we see great potential to monetize Lomotif, and we could not be more excited about the future,” ZASH Chairman Ted Farnsworth said announcing the acquisition.

From the perspective of what ZASH is trying to accomplish, the transaction makes a lot of sense.

What’s Vinco’s Piece of the Pie?

This is where it probably gets murky for you if you hold BBIG stock. 

According to the July press release announcing the acquisition of 80% of the Lomotif short-form video platform, the combined businesses: Vinco, ZASH and Lomotif had a valuation of $5 billion.

So, if I’m doing my math right, Lomotif founder Paul Yang retains 20% of Lomotif, and Vinco and ZASH each own 40% of the business. As part of the transaction, Yang got 5.5 million shares of BBIG stock. 

Beyond that, I couldn’t tell you how much ZVV Media paid for Locomotif. If you can tell me, please do. 

As for AdRizer, I assume loans taken out by ZVV Media will provide the $25 million in cash. However, the issuance of $83 million in ZASH common shares complicates the transaction. 

The investors behind AdRizer are getting an $83 million stake in ZASH, not ZVV Media or Vinco. So, while Vinco shareholders aren’t getting diluted by the acquisition, the 50/50 joint venture no longer seems to be an even split because ZASH just made an $83 million contribution to the purchase. 

My guess is that Vinco will ultimately have to pay $41.5 million of its stock to ZASH to maintain the 50/50 arrangement. 

But as I said earlier, this whole Vinco thing has more moving parts than a GM assembly plant. 

The Bottom Line on BBIG Stock

Until some of the intricacies of this latest deal get flushed out in regulatory filings, I have no way to assess the value of this acquisition. And neither do you. 

As I said in August, I have serious reservations about Vinco Ventures. Unfortunately, the acquisition of AdRizer does little to remedy my concerns. 

Good luck if you own this stock. You’re going to need it. 

On the date of publication, Will Ashworth 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.

Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia.

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