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ECIG Ltd stock: disaster or opportunity?

A few months ago, investors holding stock in the Electronic Cigarette International Group, traded over the counter as ECIG, were sitting pretty. Share price seemed steady at about $5, and the company was planning to go on the NASDAQ, after of a year of aggressive expansion and acquisition. The company “looked like a rock star headed for bigger things,” according to the market-watcher site Microcap Daily.

But the past month and a half has seen a plummeting stock price for the vaping conglomerate, which has necessitated a postponement of the NASDAQ listing, a move which involved penalties amounting to more than $16 thousand per day. Some investors are rushing to sell, despite the fact that the company still has big plans for expansion of distribution networks for its growing stable of e-cig brands.

“ECIG has a ton going for it,” concedes Microcap, “including massive revenues & revenue growth and a really strong management team; Brent Willis and William R Fields . . . are determined to make ECIG a major player.” A third-quarter financial report showed earnings up 41%. The company has “a strong cash position . . . and $30 million in current assets.” Victory E-Cigs, the company's original brand, has announced a distribution alliance with Wal-Mart subsidiary ASDA Stores Ltd., and recent acquisition Vapestick, a dynamic mover in British and continental European markets, is bringing out an innovative product called Advance Vaping System (AVS), in conjunction with British hypermarket chain Tesco.

But such impressive statistics and plans have not slowed the stock's apparent free-fall. Investors might have been less jumpy “if the massive net income wasn’t achieved through a $38.6 million gain on advisory agreement warrants,” cavils an article on Hot Stocked. “Not to mention that the negative working capital deficit actually got even bigger and from approximately $21 million for the second quarter of the year now stands at $40 million.”

The day after Thanksgiving, 637 thousand ECIG shares changed hands, an unprecedented amount, amounting to a 32% drop, with an end-of-day price of $0.62, and an end-of-month percentage drop of 83%, according to Hot Stocked. The past two days (1-2 December) have seen even more volatility, with more than 7 million shares traded, and the price currently stands at $0.33.

What caused the dramatic drop, with such impressive growth figures in terms of revenue? Well, according to Hot Stocked, “during 2013, some investors bought 10 million shares at $0.25 a piece, . . . [and] had the opportunity to flood the open market with a huge amount of discounted stock . . . during the first half of the year.” Developments such as this “should have warranted some extra caution,” says Hot Stocked.

Has the company reached too far? Maybe, but some investors think the current low stock price could make for a good “entry point”. Those who are optimistic about the company's ultimate future might want to invest in ECIG Ltd now, in the expectation of big profits in the future.