Vape Holdings, Inc. (OTCMKTS:VAPE) Cut Down by Negative Sentiment

Vape Holdings, Inc. (OTCMKTS:VAPE) played at boiling the frog in the past days, as the slide initially looked like a rather gradual and healthy recovery. Unfortunately, the slide continued for too long and ended with an even deeper crash this Wednesday. VAPE seems unable to keep up the high price after the reverse split, and readjusted even more sharply, losing more than 57% to $2.36. Dollar volumes were above $7.3 million, as VAPE became one of the most actively traded pot stocks on the OTC markets.

Now, the big question for VAPE is when it would find its preferred position, and whether it won’t return to a price range since before the reverse split. Still, at this position, VAPE looks respectable compared to other MMJ stocks.

The news that immediately preceded the crash were an 8-K filing detailing the settlement of two old warrants. To settle the claims, VAPE issued 356,516 new shares, a significant addition to the relatively low 6.1 million shares outstanding. An additional warrant for more than 355 thousand shares worsens the situation. There are some limitations to the selling of the warrants and the shares- namely that the holders should not sell more than 15% of the holdings on days where trading volume for VAPE is less than $1 million.

We are yet to see how the extra shares in the sidelines will affect VAPE, but for now, things are looking dismal, just as once the climb for this ticker was stratospheric. Now, the danger is that VAPE may attract more buyers at what looks like a bargain price. If the depression of the MMJ sector continues, this may burn even more of the investments, especially now that VAPE enters the zone of more easily affordable stocks.

Investors’ forums indeed indicate that VAPE has been oversold, and would have at least a short-term run in the green from the current positions. This comes with a slim, tentative recovery in the Marijuana index, where VAPE now takes up a small 0.32% weight. Still, the ticker was depressed after a critical article from Seeking Alpha, and investors suggest that a part of the drop meant great earnings for short-sellers. Also, VAPE suffered further in the week when the SEC was suspending big names in the MMJ sector, primarily Growlife, Inc. (OTCBB:PHOT).

VAPE resembles the potential of Fresh Healthy Vending International, Inc. (OTCMKTS:VEND), which is now struggling with a much lower price. Still, VEND keeps some of its business appeal, despite the fact that the rise in prices was rather artificial, caused by a concerted promotional effort and PR messages.

VAPE has a history as a social network company that had a limited success, but also arrived late in the game, where older social networks had taken over the market. Now, VAPE came right in the middle of the legal marijuana craze, and rose to the top of the game. If you still have confidence about the industry as a whole, or in individual companies, it is still best to avoid over-investing, unless you can absorb events like yesterday’s crash.