More stock market drama at $ECIG
The independent electronic cigarette company ECIG (Electronic Cigarette International Group) is calling on its shareholders to vote for a “reverse split” of its stock value, and some investors are talking about resisting the move. The action is touted as a defense against a possible takeover attempt, and also as a renewed attempt to get the stock listed on the NASDAQ instead of being sold as an OTC ('over-the-counter') stock.
This new development comes after a year-long roller coaster ride, as the company has engaged in a dazzling acquisition spree and become the hottest stock around – an adventure that resulted in a plummeting stock price during the last few months of 2014.
A year ago, the company was Victory E-Cigs, based in Michigan, selling a single brand just like hundreds of other fledgling vaping supplies firms. Early in 2014, under CEO Brent Willis, they acquired several other American concerns, including the premium brand FIN, and boasting of the hottest stock deal in the industry. Only a few months later, they began acquiring overseas brands like Britain's Vapestick (whose CEO promptly launched operations in Russia and Ukraine, and was named President of the European trade group) and VIP E-Cigs with its scandalously sexy adverts on the telly. Changing the company name to an acronymic emblem of the industry itself, ECIG, the burgeoning company announced plans to move its stock onto the NASDAQ exchange, where it can compete with the juggernauts of Big Tobacco.
The acquisitions spree had been funded, however, with massive short term debt, which needed to be converted ASAP. The result was a flooding of the market with short stock, which drove the share price into a nose dive. Alex Ryan of Micro Cap Insider says that “note holders flooded the markets with blocks of newly minted shares. The Company was at their mercy because they had been forced to give highly favorable terms in the conversion provision.” By year's end, shares were trading at 0.05 USD. Market analysts insist that this is not necessarily a bad thing for the company's long term health, however, since some investors may want to hitch their wagons to a discount-priced star in the hope of a rapid rise. After all, vaping products are the hottest market item around, and ECIG certainly seems to be the hottest independent company in that market.
It may be that the company fears a takeover bid from Big Tobacco, which has shown an interest in crippling competition from independents, by asking regulators to outlaw the products independents make best. Takeovers have been rife in the industry – Lorillard bought Blu, Altria bought GreenSmoke, Imperial bought Ruyan/Dragonite (along with, they claim, its patents). It is not inconceivable that ECIG's Michiganders aim to become the independent that can rival Big Tobacco, and consequently anticipates a buyout bid from Big Tobacco as a block to that move.
Market analyst and ECIG stockholder Edward Vranic believes that ECIG is indeed a takeover target for Big Tobacco, and notes the following statement in the company's pronouncement on the proposed reverse split:
"If the Reverse Stock Split is approved by the Stockholders and is implemented, the increased proportion of unissued authorized shares to issued shares could, under certain circumstances, have an anti-takeover effect. These authorized but unissued shares could be used by the Company to oppose a hostile takeover attempt or to delay or prevent a change of control or changes in or removal of our Board...."
The stock market permutations of the vaping supplies industry are rivalling the entertainment industry for thrillers that keep you on the edge of your seat. Watch this space!