Read This from the past - Nothing has changed with the exception of some dubious stock manipulation.
Sort out the debt and we go parabolic
Victory Electronic Cigarettes: The First of it’s Kind
Posted On 18 May 2014. Equedia
Victory Electronic Cigarettes: The First of it’s Kind
Six months ago, I introduced you to a small unknown company that traded on the American over-the-counter market.
It was the first time I have ever written about a Company that traded exclusively on that exchange.
As such, you can understand that I must’ve had strong reason why.
At the time, the Company was doing around $2 million per year in sales.
This year, that same Company is expected to do in excess of $100 million in sales.
If you missed my original report, I strongly suggest catching up on it by CLICKING HERE.
Why?
Because this Company could soon make history by becoming the only publicly traded company of its kind on a big board stock exchange.
More on this in a bit.
Incredible Growth
In just the last few months, this Company has become one of the largest global independent companies of its kind.
It is also a leader in one of the most disruptive and fastest growing sectors in the world.
Just imagine what that means for one second.
Over the past few years, 3D printing has led the way in disruptive technologies – reinventing and propelling the printing sector into a whole new stratosphere. As a result, shares of 3D Systems, one of the dominant players in the space, rose to a whopping $97 per share with a PE ratio of nearly 200 in the last year.
Amazon, the pioneer and continued innovator of online shopping, currently trades at a PE ratio of 470.40, while other companies like Linkedin trade at even higher multiples.
My point is that anytime a company dominates a space in a disruptive market, its shares almost always trade at high multiples based on expected growth and earnings.
This isn’t hypothesis, it is fact.
So what value would you give a company that’s expected to increase its revenue by more than 50 times in less than a year?
What value would you attribute to a company in a space so disruptive that it is expected to eventually overtake a behemoth $756 billion global industry?
We’re soon about to find out.
The Biggest of its Kind
Last year, I introduced you to the story of an extremely successful man who wanted to make a difference when he watched his father die from smoking.
It was the story of Brent Willis and his quest into one of the most disruptive, profitable, and fastest growing sectors in the world: Electronic Cigarettes.
I also introduced to you one of only two pure-play independent, publicly traded electronic cigarettes companies:
Victory Electronic Cigarettes (OTCBB: ECIG)
In that letter, I talked about its CEO Brent Willis and his track record of success, as well as how he would be the man to drive Victory Electronic Cigarettes (Victory) into massive growth.
He hasn’t disappointed one bit.
Sales at Victory are expected to be in excess of $100 million this year, up $98 million from just a year ago.
But that’s not all…
Victory Files $150 Million Offering with Wells Fargo and Canaccord Genuity, Going NASDAQ
Last week, Victory Electronic Cigarettes (OTCBB: ECIG) filed an S1 application with the SEC for a whopping $149.5 million offering in conjunction with the intention to list its common stock on the NASDAQ Global Market under the symbol “ECIG.”
This offering is being led by Wells Fargo, one of the largest banks in the U.S.
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The S1* filing means Victory could soon make history by becoming the largest – and only – publicly traded independent pure-play electronic cigarette company on a major stock exchange.
*Filing of an S1 is not guarantee that a company will be listed on a senior exchange, nor does it mean that the filed offering will take place.
This is the event I have been waiting for.
Over the past few months, I have updated you on Victory’s progress and specifically stated that a senior listing is what this Company was missing.
Here’s an excerpt from my report last December:
“I think the stock is expensive at these levels as a result of what appears to be a really small float and it seems that no one wants to sell stock. Keep this in mind because that means we can see big price action swings.
…I’d like to see Victory do a big raise and go for a NASDAQ listing in conjunction with that raise – that way, we’ll see better liquidity and easier access to their stock.”
I had no idea that Victory – just months after my original letter – would announce that it is expecting to do over $100 million in sales in 2014, file for a massive $150 million offering, and go NASDAQ – all in less than six months.
I knew there was something special with Victory’s team, but I had no idea things would happen so fast.
That’s why I believed the stock was expensive.
Yet, I still felt that Victory was a company everyone – retail, institutions, brokers, analysts – should be watching because I knew Brent and his team were up to big things.
Today, I have to admit I was wrong: Victory has become much bigger than I even anticipated.
I should’ve known; Brent did the same thing at InBev, where he helped the Company lead 39 acquisitions in 36 months and eventually transformed the Company into the world’s largest beer distributor.
With Victory share prices now within very reasonable ranges, combined with an injection of liquidity from one of America’s biggest banks, the market could soon light up.
Let me get back to this.
The Fastest Growing and Most Disruptive Sector
There’s no need to pitch you on the massive growth of the electronic cigarette market anymore.
One simple Google search for “electronic cigarette” will turn up more than 50 million results.
You’ve likely seen it all over the news on CNBC, Bloomberg, CTV, BNN, or whatever news station you watch.
You’ve probably seen numerous people using the product.
If there were any doubts about the growth of electronic cigarettes, they have been wiped out.
Fear the Competition
Fearing that it could overtake traditional tobacco in terms of sales, every major tobacco giant has begun marketing its own brand of e-cigs.
Starting next month, tobacco giant Altria (NYSE: MO) will begin launching its MarkTen brand of e-cigs nationally next month, while Reynolds American (NYSE:RAI) said it will rollout of its Vuse brand of e-cigs and hit 15,000 convenience stores by the end of June.
Currently Lorillard (NYSE: LO) is the leader in the e-cig space.
If you recall from my original letter, Lorillard bought out the blu eCig brand for $135 million in 2012.
At the time, blu eCig had revenues (not earnings) of only $40M.
Seems like a high price to pay for a small company…or was it?
The decision to buy blu has already proven its worth in premium. Blu generated $230 million last year for Lorillard, with sales that rose 38% in the fourth quarter alone.
Now that Altria and Reynolds have launched their own products nationally, Lorillard may see its market share begin to tumble.
But Altria and Reynolds is far from Lorillard’s biggest fear. As a matter fact, they should all be fearing someone else…
Big Tobacco’s Greatest Foe
With sales anticipated to be in excess of $100 million this year, Victory is most certainly on the radars of every major tobacco firm.
But that blip in the radar could soon become the elephant in the room.
The $150 million offering, in conjunction with a NASDAQ listing, will not only make Victory the largest publicly traded independent pure electronic cigarette play on a major stock exchange, but it will give the Company a massive war chest to continue its growth.
The biggest question is how will a company like Victory compete with big tobacco?
The answer is simple: Management.
A Force to be Reckoned With
Victory is a small company compared to the big tobacco players. But its management team is comprised of some seriously big players.
I have already discussed the credentials of Victory’s CEO Brent Willis in my original report. But since then, Victory has also added other big boys to the BOD, notably, William Fields.
William (Bill) R. Fields is a major player in the retail space. He was once the President and Chief Executive Officer of Hudson’s Bay Company, a past Chairman and Chief Executive Officer of Blockbuster Entertainment Group, and he held numerous positions including President and Chief Executive Officer of Wal-Mart Stores Division, and Executive Vice President of Wal-Mart Stores.
Just last month, Victory added James (Jim) McCormick as their CFO.
This man was the Chief Financial Officer of Sodexo, Inc. a global food and facilities management company, with over 428,000 employees worldwide. From 1992 through 2008, James was a senior manager with British American Tobacco, a multinational tobacco company, holding numerous Chief Executive Officer and Chief Financial Officer roles around the world.
With a stacked management team comprised of those with extensive retail/distribution and capital markets experience, Victory is certainly leading the charge in the electronic cigarettes market space.
Victory is more than just a threat to big tobacco; it could become a direct competitor to those guys.
FDA Ruling – Added Ammunition
The electric cigarette market has become the spotlight target for the FDA, and with good reason.
It is already competing directly with traditional tobacco sales, which means big tobacco has likely, and hypocritically, voiced their opinions to the FDA.
Just last month, the FDA proposed new rules for the space.
Most of the proposed rules have little effect on electric cigarette companies in terms of their ability to generate revenue.
However, one of the proposed rule may be in favour of big tobacco.
Part of the proposed rules stipulate that the FDA will allow all e-cigarettes on the market that are “substantially equivalent” to devices that existed prior to February 15, 2007 to remain on the market.
That means old products will continue to be allowed for sale, but new ones will have to go through FDA approval.
Since this sector will not continue its strong growth curve without further innovation, the FDA has just limited both innovation and significantly increased the cost structures of companies in the sector.
In other words, if you’re a little guy, you’re going to eventually get squished.
Victory could not have timed both its entry into the market, and its $150 million offering, any better.
The proposed rules give Victory an even greater bargaining chip at the table during acquisition talks: either join a public company with a war chest of cash, sales, skills, and international presence, or get squished by big tobacco and the FDA.
Brent led 39 acquisitions in 36 months at InBev…how many do you think his team can accomplish in this space if the new FDA rules pass?
Capital Market Feeding Frenzy
Brent and his team have been able to turn a small unknown company with sales of $2 million, to a Company with anticipated sales of over $100 million (and likely growing) in less than a year – all without the big bank roll that big tobacco have, nor the public presence that a major stock exchange brings.
Once this S1 filing hits the radar of the big banks, you can bet there will be plenty of players flocking to this stock. I am not sure who else will be part of the offering syndicate but I am guessing we’ll see some other big banks fight their way in for a piece of the pie.
Victory has already raised over $53 million this year in debt and equity, with convertible notes and warrants priced between $5-$6.50 (see S1 for more details).
The stock currently trades at $6.12.
With less than 75 million shares outstanding, it doesn’t leave a lot of shares for institutions to get involved. The public float is even smaller, which means there’s going to be a feeding frenzy for those who want to get involved.
If ECIG gets final approval to list on the NASDAQ, it will not only become the largest publicly traded pure-play electronic cigarette company in the world, it will be the ONLY publicly traded company of its kind on a big board stock exchange.
When you consider that the electronic cigarette market is one of the fastest growing sectors in the world, and that it is expected to surpass traditional cigarette sales within the next decade, Victory’s NASDAQ listing could be something very special.
The anticipated NASDAQ listing will open the door for easier access to large financings, which means Brent and his team will be able to do what they do best: acquire and conquer.
There are going to be many institutions that are going to be left out of this massive $150 million offering. If they want stock, they’re going to have to buy it in the open market.
I am not kidding: when Victory stock hits the NASDAQ, I think it’s going to trade like a horse.
That’s why we could begin to see stronger trading activity in Victory’s stock now, as speculators who want to participate early begin to accumulate shares on the OTC market under Victory’s current trading symbol: OTCBB: ECIG.
Victory’s potential is only limited by the size of the market…and the size of the market is growing fast.
