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Why Electronic Cigarettes Intl Group Ltd (OTCMKTS:ECIG)’s New Funding Isn’t Popular With Investors

Electronic Cigarettes Intl Group Ltd (OTCMKTS:ECIG) is set to benefit from fresh funding for its working capital. Although that is supposed to come as good news, it is not for shareholders of Electronic. The reason for the dissatisfaction with the financial boost is that it will lead to further dilution of the company’s stock, thereby eroding shareholder value.

Dilutive impact

Electronic Cigarettes Intl Group Ltd (OTCMKTS:ECIG) inked a deal for $26.6 million in working capital funding. The company issued convertible notes and warrants to purchase common shares to an undisclosed financier. The conversion of the notes will lead to more dilution of the stock. Shareholders of Electronic Cigarettes Intl Group have in the recent past clearly communicated their dislike for continued dilution of the stock. When Electronic Cigarettes Intl Group sought to increase its authorized shares, shareholders declined to approve the request.

In the latest funding deal, Electronic Cigarettes Intl Group Ltd (OTCMKTS:ECIG) issued nearly $14 million of convertible notes and nearly 226.6 million warrants with par value of $0.001 a share. Electronic Cigarettes Intl Group is set to tap $13 million in gross proceeds from the warrants offering.

Electronic cigarettes

Electronic Cigarettes Intl Group Ltd (OTCMKTS:ECIG) has continued to grow, rising to $15.9 million in the most recent quarter from $11.3 million in the previous quarter and $0.83 million from a year ago. Analysts expect electronic cigarettes to become a huge business in the coming few years as awareness about the products increase and more smokers switch to more healthy smoking habits.

Electronic Cigarettes Intl Group Ltd (OTCMKTS:ECIG) distributes a wide range of electronic cigarette and vaping brands. However, recent reports have cited that electronic cigarettes market is under threat from the rise of copycat versions. The counterfeit products are quickly penetrating developed markets with cheap and poorly manufactured products. The rise of copycat electronic cigarettes could adversely impact sales of genuine products if quick efforts are not made to stop their circulation.

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