Stock split at ecig, share passes dime
At yesterday's stockholders meeting, the assembled shareholders of the Electronic Cigarettes International Group (which trades over the counter as ECIG Ltd.) approved the stock split proposed a few months ago by management. More than 84% of the company's investors approved the measure, which will mean that the number of shares held by each of them will rise, while dollar amounts owned will remain the same. The immediate result of the action was an increase in stock price to more than $0.11, up from a precarious low of about $0.03 a month or so ago.
The company has been an object of fascination for market watchers during the past year, engaging in vigorous expansion (and acquiring a daunting debt load) before entering a dizzying nosedive in stock value at year's end. New brass has made changes, reassured creditors, and reorganized plans to handle its considerable debt load, and the proposed share price split was part of that set of changes. It looks like it's working.
It seems as though the Michigan-based firm is bidding for a position as the leading non-tobacco force in the vaping supplies industry. In 2012, Big Tobacco muscled in on the industry, which it had initially opposed as a drain on its customer base. Changing strategies from opposition to co-option, cigarette makers dominated the industry's sales charts for a couple of years, relying on their loyal customer base and their entrenched distribution networks. Buyouts of independent companies like Blu, GreenSmoke, and Dragonite fueled this strategy, along with in-house development of Big Tobacco e-cigs such as Vuse, Vype, Puritane, and MarkTen.
At that time, the future ECIG Ltd. was just little Victory E-cigs, one of a host of fledgling startups in the nascent industry. In 2014 it started muscling up, merging with FIN's premium brand and buying the rising British firm Vapestick, with the result that the new conglomerate moved assertively into UK and continental markets. They also established distribution agreements with hypermarket chains that possess worldwide clout. None of this came cheaply, of course, and shareholders gasped with sticker-shock, even as they held on for dear life during a hair-raising free-fall on the stock market, from a share price of about $20 a year ago, to under a nickel last month. Everyone seems to be breathing easier now.
One cannot help but wonder how last month's news from Atlantic Vapors figures in to all of this. It seems that cigarette seller Altria of Richmond, Virginia, the largest American tobacco company (Marlboro and other cigarettes, MarkTen e-cigs developed in house, GreenSmoke e-cigs bought out), has expressed an interest in buying little Atlantic Vapors for a seven-figure price. (Seven figures means at least a million dollars, which begins to go beyond pocket change for a Big Tobacco purchase of an e-cig concern – British American is paying Lorillard $7 mil for Blu, and Imperial paid $75 mil for Dragonite with its patents, which arguably take precedence as the first patents in the industry.) Why does Altria want Atlantic? Because it has a patent on a "predicate product" – and for the US Food and Drug Administration that means a product that doesn't have to go through mountains of costly bureaucratic work to gain FDA approval, since it was on the market before the "grandfather date" of February, 2007. That could be worth a lot to any e-cig company – it could spell industry dominance, and Big Tobacco wants that dominance, while independent vaping products concerns would be delighted if that dominance were to be positioned outside Big Tobacco's stained and grasping hands.
So what does this have to do with ECIG Ltd.? Just this: In a statement responding to the Altria offer, Atlantic stated that it was not unalterably opposed to the Altria purchase, as long as an enforceable assurance of a level playing field could be obtained. In other words, Altria would have to agree not to use the predicate product to force independents out of the market. What's the prospect for snowballs in Hades? Better, I'd say.
However – and here's the important part – in the same statement, ATLANTIC STATED THAT IT WOULD PREFER A BUYOUT BY AN INDEPENDENT E-CIG MANUFACTURER LIKE ECIG LTD. – which was mentioned by name! The upshot of the affair could be the emergence of a non-Big-Tobacco e-cig conglomerate with the clout to challenge Big Tobacco's dominance. So are Atlantic and ECIG making collusive plans behind the scenes? It certainly seems possible.
Since the Atlantic story broke, the search engines have been eerily quiet about the issue. As though the ball had spun into the air from a player's hands and is now arching in slo-mo above the upturned heads of all the players, waiting to see who will snag it and run with it.