Preface: I have no horse in this race, as I started following the stock when the pump and dump e-mail campaign of last spring was at its peak, and I was curious as to how this would play out.
Main Point: Both the bulls on the stock and the bears are raising valid themes - and that's what explains why the stock is neither selling at a penny or less anymore nor at a dime or more.
Case for the Bulls: This is a booming industry in its infancy. The company has the right products at the right time and is remarkably showing even a small profit very early in its history. Also, the technical case for the stock is strong, given how it's up six times from its low of .006. The company's emphasis on debt financing versus equity financing (which would be dilutive by definition) means the stock will be as volatile going up, based on earnings growth, as it was going down from the intraday high of $2.01 (the stock actually closed that day at $1.40, I believe). The fact that the company is not specifically involved in marijuana is a plus, as there may be an image issue with that involvement (e.g. the governor of Colorado recently has regretted that marijuana was legalized there).
Case for the Bears: The "quality" of the reported 44K earnings is weak, as interest expense hadn't yet fully kicked in as of the reporting period of the 44K earnings. Also, the managerial salaries are "artificially" low. G&A expenses will likely continue high, given the constant PR campaign. It is problematic that the company turned to the CPA firm of Winther and Company to resolve its "material weakness" in internal controls problem reported in its SEC filing (this just looks bad to deal with an issue in "segregation of duties" by retaining your own family to resolve it). FINRA issued its warning to be careful with e-cigarette stocks that started up via the way VHUB did, i.e. by absorbing the company which was involved in maintaining "hotels" for dogs. The fact (I believe that I've furnished the Kiplinger link in earlier postings) that this company itself has a pump and dump history is a red flag. That least addition to the debt, the six month loan with an astronomical real interest rate which needed to be guaranteed by primary stockholders, makes it look like the prior $1.6 million loan wasn't fully thought out by management as regards how much funding might be needed to support the growth of working capital while sales are booming. Finally, frankly the religious fervor of the bulls towards this stock actually helps the bear-case, as emotionally involved investors tend to do less well.
My Conclusion: You can't "fight the tape." The bulls are winning at the moment, gaining fervent investors daily, and this is decreasing the "effective float" rapidly (if we believe the new holders who are writing that they plan to be in the stock for years instead of days). The most likely moment for an exceptional run-up in the stock will be as rumors circulate about the great Christmas selling season. But one will need to read the balance sheet and the footnotes that will be issued with the earnings release, as there is a reasonable chance that working capital will remain problematic while interest expense will be kicking into full gear.
My Request: Can we be civil here, with both the bulls and the bears welcomed. It's OK for each group to challenge the other as regards whether a post is being offered based on emotion or based on fact, but each group is better served by listening to the case of the other group. ...and now I'm off to weigh in on another discussion board of vital national interest, Deflate-Gate. May you all have a good week, and thanks for letting me play in your pond!
