Dear BBIG Stock fans, mark your calendars for July 26th

Source: vincoventures.com

Vinco Ventures (NASDAQ:BIG) announced last month that it report its extraordinary general meeting on July 26 after originally planned for July 1. The company extended the date to give shareholders more time to vote. BBIG stock is down about 40% year-to-date and hovering around $1.

In addition, Vinco is currently facing a Nasdaq non-compliance issue. Vinco named John Colucci as interim co-CEO last week. However, Colucci also sits on the company’s board of directors. This places the board in non-compliance with Nasdaq requirements. The Nasdaq requires that a company’s board of directors be made up of a majority of independent directors. The appointment of Colucci moves the board of directors so that a majority of directors are directly involved in the company. The chairman of the board has recommended that Colucci step down as a director for the next 60 days while the board works to find a replacement.

With that in mind, let’s take a look at what will be voted on at the shareholder meeting.

Dear BBIG Stock fans, mark your calendars for July 26th

Prior to the meeting, BBIG shareholders will be able to vote on two changes that the board supports. These two changes are:

  1. Approve an amendment that would increase the number of common shares outstanding from 250 million to 750 million.
  2. Approve an amendment that would increase the number of preferred shares from zero to 30 million.

Shareholders also had the right to vote to adjourn the meeting to a later date than the original July 1 date. The meeting was later rescheduled for July 26 on June 29.

So why exactly does Vinco want to increase its number of outstanding shares by 500 million shares? Often companies issue new shares raising capital to finance projects. Additionally, Vinco may wish to reward its employees with employee stock options (ESO). When exercised, OES are converted into new shares.

Yet, if approved, the number of shares outstanding would increase by 200%, diluting current shareholders. It’s likely that Vinco would do this over a period of time rather than all at once.

Meanwhile, Vinco would like to create 30 million preferred shares. Preferred shareholders have a higher right to distributions, such as dividends, than common shareholders. In the event of bankruptcy or liquidation of the company, the former preferred shareholders will also have a higher asset claim than the latter, the ordinary shareholders. The trade-off is that preferred shareholders usually have no or limited voting rights.

At the date of publication, Eddie Pan held (neither directly nor indirectly) any position in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com publishing guidelines.

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