Borislav Tonev

Vapor Corp (OTCMKTS:VPCO) Gasping for Breath

by Borislav Tonev February 25, 2016

The OTC Markets is literally chock full of companies working in the electronic cigarette business. When Vapor Corp (OTCMKTS:VPCO, VPCO message board) got up-listed to the NASDAQ Capital Market, it looked like it is going to be one of the few that will actually succeed and make some people rich. Investors were pretty excited back then, but unfortunately for them, VPCO is now back on the OTC and it's not in a particularly good shape.

The truth is, however, people should have seen it coming. The mere fact that NASDAQ approved VPCO's listing application serves as a good enough proof of the company's solid operations. Unfortunately, if you comb through the SEC filings, you'll see that the progress has slowed down significantly, and you'll also see that at one point, the lack of profitability and significant cash reserves presented a rather huge problem. That was the first red flag.

Last year, the management team decided to strengthen the bank statement a little bit and a public offering of securities was organized. Some units were sold, some shares saw the light of day, and although the offering did provide a stable cash position for VPCO to step on, the dilution has wreaked absolute havoc with the stock performance. This was somewhat predictable. In July 2015, the management team effected a 1-for-5 reverse split, and in addition to it, they raised the authorized cap instead of lowering it. That was the second red flag.

Then, an enormous wave of dilution hit VPCO and it completely squashed retail investors. Between July 29 (the date of the reverse split) and February 24, the stock dropped from over $1 all the way to yesterday's close of just under $0.002 per share. During roughly the same period, the O/S count ballooned from around 4 million to more than 888 million, the number of authorized shares was increased twice which means that it's now sitting at 5 billion, and the NASDAQ Capital Market first halted and then de-listed the ticker.

Where to next?

For the time being, the stock performance is quite volatile and most investors appear to be a bit uncertain about the company. Between February 19 and February 23, for example, the ticker plummeted from $0.002 all the way to $0.001, but during yesterday's session it bounced and reached a price of $0.0017.

The members of the management team are trying to regain some investor confidence. They said that an agreement with the holders of the Series A warrants (one of the main sources of dilution) has been reached which means that the warrant holders will refrain from exercising their warrants for the time being. They also said that VPCO will try to regain listing on the higher OTCQB or OTCQX tiers.

None of this will happen before the shareholder-approved reverse split (the ratio of which remains unknown for now), however.

You will be the one to decide whether VPCO can enjoy a more solid performance after the split. We'd like to point out, however, that once again, the split won't be accompanied by a decrease in the number of authorized shares.

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