Why Is Vinco Ventures (BBIG) Stock Down 20% Today?

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As if digital-media-focused business development firm Vinco Ventures (NASDAQ:BBIG) needed any more drama to add to its eventful time in the market this year, it released an alarming disclosure that it thwarted a hostile takeover attempt. Later, Vinco stated via a tweet that the aforementioned statement did not receive proper authorization. Amid the confusion, BBIG stock dropped about 20% in afternoon trading.

According to a press release issued on Monday, July 25 at 8:46 p.m. Eastern, Vinco stated that it terminated Theodore Farnsworth — the former CEO of Helios and Matheson Analytics (OTCMKTS:HMNY) and chairman of MoviePass — as its co-CEO less than 72 hours after he was appointed.

In addition, the announcement stated that it terminated “Lisa King as the President of ZVV Media Partners, LLC and former CEO of the Company, Erik Noble as the Company’s Chief Security Officer and any other role, and any and all arrangements between the Company and Roderick Vanderbilt, including as business development director and Chairman of the Board.”

Specifically, Vinco refers to Farnsworth, King, Noble and Vanderbilt collectively as the Farnsworth Group, which allegedly attempted a hostile takeover of BBIG stock, initially sparked by an authorization — and subsequent prevention of corrective filing — of a false Form 8-K. Under this misleading document, it stated that Farnsworth had been appointed as Vinco’s co-CEO.

Needless to say, the development had many folks scratching their heads regarding BBIG stock. But if that wasn’t bad enough, management made the whole matter even more confusing.

BBIG Stock and the Unnecessary Distraction

While market observers were busy digesting the disclosure about the hostile takeover attempt, Vinco through its Zash Global account tweeted late night on July 25 that it did not authorize the statement in question. This only added more perplexity to a massively confusing circumstance. Naturally, investors were not amused, sending BBIG stock tumbling the next day. For further details about the ordeal, InvestorPlace Assistant News Writer Eddie Pan provided a comprehensive but succinct breakdown.

Fundamentally, the matter is somewhat tragic because Vinco — despite its odd business structure — made headway with Lomotif. The platform is a video-sharing network that rivals China-based ByteDance creation TikTok. However, the popular video app’s parent company finds itself in hot diplomatic water, courting accusations from lawmakers of illicit data collection of U.S. TikTok users.

Under the speculative framework, bullish proponents of BBIG stock likely bid up shares as ByteDance’s woes accumulated heavily. However, one company’s trash isn’t necessarily another firm’s treasure. In this case, Vinco needs to focus on its internal conflicts before it’s in a position to advantage competitive shortfalls.

Of course, the main issue is that Vinco is the struggling upstart in this narrative. It likely can’t afford too many of these embarrassing incidents before it shakes the confidence of its supporters.

The Importance of Clarity

On a final note, the University of Kansas conducted research that demonstrated too much executive turnover hurts companies. While modest shaking of the top ranks can help remove cobwebs and improve overall corporate performance, going overboard ends up creating net negative results.

Logically, then, it stands to reason that chaotic shuffling of executive roles — along with cryptic recanting of critical information — will hurt organizations even more so. Thus, the volatility of BBIG stock isn’t surprising. And unless management gets a grip on the matter, the pain could continue.

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 InvestorPlace.com 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.