Vapor Group Inc (OTCMKTS:VPOR) Issues Letter To Shareholders, Drops Below $0.001

Back in February the stock of Vapor Group Inc (OTCMKTS:VPOR) registered its new 52-week low of $0.0008 but the stock was able to avoid closing below $0.001. Until yesterday, at least, when the ticker crashed by 25% and by the time of the closing bell was sitting at $0.0009. VPOR registered its second highest daily volume when 467 million shares got dumped on the market during the session.

This latest sell-off came as a result of the letter to the shareholders which VPOR filed yesterday. In it the company announced several rather alarming events. First, as we told you in our previous article, at the start of May the company changed its independent accounting firm. The new auditors required a revision of the annual report for 2014 in order to include adjustments to the “embedded conversion options” inside convertible promissory notes. This means that the financial report covering the first quarter of 2015 will have to be filed after the amendment of the annual report has been completed. According to VPOR the quarterly will be submitted in a couple of days.

The quarterly report is extremely important because it will show exactly how much convertible debt is still outstanding in addition to revealing the exact number of the shares issued by VPOR as a conversion notes. Since the start of the year shareholders of the company have had to suffer through a crushing dilution of VPOR’s common stock. During the first three months of 2015 $1.7 million worth of convertible debt was turned into common shares at discounted prices. We won’t know how much debt that can still be turned into shares is left until the financial report.

What we do know and what VPOR announced in the PR from yesterday is that they were forced to once again increase their authorized shares. Two months ago VPOR already increased their authorized shares to 4.5 billion but apparently even that amount was not sufficient. Now the company’s A/S stands at 8 BILLION.

According to VPOR their operations are growing but will this be enough to offset the horrific dilution of the common stock? Keep in mind that between January 1 and March 31 the outstanding shares ballooned from 930 million to over 2.6 BILLION. How do you think the market will react if the quarterly report shows that the rate at which new shares have been printed has remained the same?

Even if you believe in the potential of VPOR‘s business the red flags around the stock remain far too big to be ignored. Do your own extensive due diligence and adjust your trades accordingly in order to minimize the chances of any unpleasant surprises. 

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