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Electronic Cigarettes Intl Group Ltd (OTCMKTS:ECIG) Takes A Break

Electronic Cigarettes Intl Group Ltd (OTCMKTS:ECIG) has been rising on massive volume from past one week. However, on Wednesday’s trading session it took a break and corrected more than 6% to close at $0.163.

The considerations

As per technical chart, Electronic Cigarettes Intl Group Ltd (OTCMKTS:ECIG) is looking a good buy. The investors who are currently loading on ECIG shares should remember that Electronic Cigarettes has a couple of convertible promissory ‘Notes’, the conversion price of which stands at $0.14. It implies that the higher the stock prices go from current levels, the more profitable promissory notes could into company’s common stock.

The concerns

The financials of Electronic Cigarettes make it a sound company and it is one of the reasons investors can continue to follow chart. The problem areas are crushing dilution, along with a reverse split and a rise in the company’s authorized share count. These factors can pose threats in near term.

Massive debt

The company has massive debt in its book. It has to face intense pressure when it failed to fulfill listing requirement of NASDAQ following which the investors started converting outstanding notes into discounted shares. After it, the shares dropped to 3 cents from peaks of $4. Also, the total count of outstanding shares surged 250 million compared to 82 million in November.

Strong performance

If the debts in book are ignored, Electronic Cigarettes Intl Group Ltd (OTCMKTS:ECIG) is performing pretty well. In the last quarter, it posted cash of more than $4 million. It posted total current assets of over $28 million and total current liabilities of around $69 million. The quarter yielded positive net income of $41.1 million, and revenue jumped to $15.9 million from $833,000 in FY2013. The total revenue in first three-quarters was $31 million. Investors can look to invest in the company as it has a real product and operates in a booming e-cigarette industry.

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