Vape Holdings Inc (OTCMKTS:VAPE) Finally Bounces
If you’re looking for consistent and predictable stock performance, the OTC probably isn’t the place for you. And while anything is possible, long-term investments are also hard to come by in Pennyland. All in all, this is mostly a place reserved for speculative trades and struggling small cap stocks. Even by these low standards, however, Vape Holdings Inc (OTCMKTS:VAPE) has to be one of the worst performing tickers out there.
It all started at the beginning of 2014 when the company changed its name and business plan and set off to sell electronic cigarettes and accessories for them. Electronic cigarettes or vaporizers have been associated with the use of marijuana, and the cannabis industry, as you probably know, was quite hot at the beginning of last year. Naturally enough, VAPE was flying on a… cloud of excitement.
The stock was sitting comfortably above $30 (that’s $30, not $0.30) and it seemed pretty happy with those levels. Then, however, the SEC decided to suspend more than a few pot stocks, among which was Growlife Inc (OTCMKTS:PHOT) – the former workplace of Kyle Tracy, VAPE‘s CEO. Suddenly, the enthusiasm around the cannabis industry started going up in… smoke.
Pot-related tickers of all shapes and sizes began tumbling down the charts and investors were getting badly burned. VAPE was no exception. By the end of September 2014, it had dropped to around $2 per share which is where the current 52-week high stands. It wasn’t about to stop its free fall, though. In November 2014, the ticker slipped in sub-dollar land and it’s been stuck there ever since. In fact, the performance between August 14, 2015 and September 28, 2015 doesn’t really suggest that VAPE is galloping towards recovery.
In a matter of just a month and a half, the ticker managed to… err… vaporize 90% of its value and it dropped from $0.30 per share all the way to just $0.03. Time to decipher some of the reasons for the appalling performance.
The financial results, it must be said, are far from perfect. The 10-Q for the second calendar quarter of 2015, for example, came out mere days before the beginning of the massive 90% drop and it looks like this:
- cash: $134 thousand
- current assets: $818 thousand
- current liabilities: $1.3 million
- quarterly revenues: $282 thousand
- quarterly net loss: $436 thousand
Back in January 2014, when the ticker was playing with the $40 per share mark, people were predicting revenues in the tens of millions of dollars. Reality is a bit different. The figures VAPE is registering are nowhere near the projections, and perhaps more worryingly, they are tumbling. The revenue drop on a year-over-year basis is 22% and sales for Q2 are 29% below the ones recorded during the previous quarter.
That’s not exactly encouraging, but on its own, it isn’t enough to cause quite as much damage. There is something else dragging VAPE towards the bottom. It’s something that we’ve been talking about for quite a while, actually. It’s called toxic debt, it has diluted the stock, and it has allowed a massive number of discounted shares to be unleashed on the open market. In order to get an idea of how bad things are, we would suggest that you have a look at an 8-K form published a couple of weeks ago. It says that between August 26 and September 18, when the stock’s market price hovered between $0.09 and $0.19, VAPE issued 2,466,581 shares as a conversion of notes at an average rate of $0.054 apiece.
Despite this and despite the rest of the problems, the ticker bounced yesterday. VAPE managed to gain no less than 65% and it stopped at a hair under $0.05 per share on a dollar volume of around $190 thousand.
Explaining the reasons for the bounce isn’t really that easy. Some people reckon that the stock is moving because of the technical factors while others seem convinced that this is the beginning of a renaissance for VAPE.
You need to decide whether you want to agree with those people and plan your actions accordingly. Whatever your decision, however, make sure you check out the 8-K form that came out after yesterday’s closing bell. It says that a further 2,647,379 shares have been issued at an average of $0.034 apiece as a conversion of debt. The O/S count currently sits at 18,347,699 or about 67% above the figure recorded nine months ago.
