Electronic Cigarette Intl Group Ltd (OTCMKTS:ECIG) Makes A Strong Bounce
Yesterday’s session began relatively calm for Electronic Cigarette Intl Group Ltd (OTCMKTS:ECIG) with the company’s stock sitting flat at $0.245. Then the ticker made a sharp jump upwards and in a matter of minutes spiked to a high of $0.332 per share. Although by the time of the closing bell ECIG had taken a step back and finished the session a little over $0.29 the gain of nearly 20.5% is still the biggest registered by the ticker since late-April. Will yesterday’s encouraging performance turn into a more prolonged recovery for the stock that just four sessions ago hit a new 52-weeks low of $0.225 though?
In the past months ECIG have tried to address some of the more serious red flags that surrounded the company but caution is still required. ECIG’s stock was decimated by the massive conversion of toxic debt and the resulting dilution. Back in March a 1-for-15 reverse split had to be implemented leaving the company with around 20 million outstanding shares. By March 31 that number had already turned into 36 million shares while as of May 15 more than 70 million outstanding shares were reported.
It is true that ECIG’s revenues are growing but unfortunately they are simply not enough to offset the rest of the numbers found on the balance sheet. At the end of the first quarter of the year 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
The picture was rather bleak indeed, however, a $41 million capital injection through a non-dilutive financing agreement allowed ECIG to strengthen their financial position and eliminate more of their outstanding toxic debt. An 8-K filing from July 2 revealed that the company raised even more funds. In addition the management team has stated that they have agreed on an annual cost saving target of approximately $12 million.
Ultimately, if the company hopes to return to the previous price ranges of its stock it will have to reduce its expenses while expanding operations without drowning the shareholders in dilution. If the financial report for the second quarter shows just that investors might be less reluctant to jump back in. Keep in mind, however, that as part of the recent financing agreements over 200 million warrants with an exercise price of $0.45 have been issued. If ECIG‘s price passes that mark the owners of the warrants might be tempted to turn them into shares.
