Electronic Cigarettes Intl Group Ltd (OTCMKTS:ECIG) Slows Down Its Recovery

For the past two weeks the stock of Electronic Cigarettes Intl Group Ltd (OTCMKTS:ECIG) has been slowly but steadily climbing up the chart. As a result the ticker has moved from an opening price of 0.275 on July 22 to a close at 42 cents this Monday for a total gain of over 52%. Although the climb has been impressive the stock may be reaching some unstable price ranges if yesterday’s session is any indication.

In the first half of the trading day ECIG continued to move higher reaching $0.45 per share just to drop down in the red during the later portion of the session. Ultimately when the closing bell rang the stock was sitting flat at $0.42.

The reason why investors are returning to the stock may be the upcoming filing of the financial report for the second quarter of the year. The report should be submitted by the middle of the month and the numbers contained in it will determine the direction of the stock. The previous financial report showed that ECIG are still generating significant revenues but unfortunately the rest of the financials completely overshadowed that positive result. At the end of March ECIG had:

• $1 million cash
• $12.7 million total current assets
• $183 million total current liabilities
• $11.1 million revenues
• $67.5 million net loss

Another huge issue was the convertible debt of the company. The resulting dilution was simply crushing and it forced ECIG to effect a 1-for-15 reverse stock split back in March after which they had around 20 million outstanding shares. As of May 15 that number had ballooned to over 70 million shares but it seems that at least for now the issuance of shares may have come to an end – the OTCMarkets profile page of the company states that as of July 15 the outstanding share count is still the same.

The company also addressed its working capital situation by raising $41 million in a non-dilutive term loan agreement. At the end of June ECIG received even more funds.

That is why the next quarterly is so important – it will show just how much has the balance sheet improved. If the numbers fail to meet investors expectation though the ticker could quickly reverse its direction. Investors should also remember that over 200 million warrants with a exercise price of $0.45 were issued as part of the recent financing deals. If ECIG’s share price moves above that mark the owners of the warrants could exercise them diluting the common stock once more.