Vaporin Inc (OTCBB:VAPO) Adds a Quarter on a Proposed Merger
Not that long ago, the company that we now know as Vaporin Inc (OTCBB:VAPO) was called Valor Gold Corp. As you might have guessed already, it was in the mineral exploration business, but it’s fair to say that things were not going according to plan. The stock went through a rather big promotional campaign back in 2012 and it disappointed quite a lot of people. In the meantime, the company was struggling with its business plan and at the beginning of 2014, the former management team finally threw in the towel. An acquisition of a private company was completed, the name was changed, some new people took the helm, and VAPO officially entered the electronic cigarettes industry.
Vapor Corp., (NASDAQ:VPCO) is another company in the same sector and it also went public through a reverse merger with an entity that was dealing with something completely different a couple of years ago. But apart from the striking similarities in their business plan and history, is there anything else in common between VPCO and VAPO?
Apparently, there is. Or, to be more accurate, there will be. The companies announced after the closing bell on Thursday that they want to effectuate a merger. Once the deal goes through, VAPO‘s shareholders should own 45% of VPCO‘s common stock. And they seem pretty happy about this.
During Friday’s session investors traded nearly 210 thousand VAPO shares which means that the dollar volume at the end of the day stood at around $540 thousand. In the meantime, the stock gained an impressive 26% and it’s now sitting at $2.53 per share.
Clearly, people are excited about the news and we can see why. After all, VPCO is listed on NASDAQ and for OTC investors, owning a company that is traded on one of the national exchanges is an opportunity most simply refuse to miss. But aren’t they jumping the gun?
The fact that VPCO is listed on the NASDAQ doesn’t necessarily mean that everything is going smoothly. Along with the proposed merger, they also announced on Thursday, their preliminary Q3 results which showed a whopping 58% drop in quarterly revenues year over year. As a result, during Friday’s session, VPCO annihilated nearly a quarter of its value and it’s currently sitting at under $2 per share.
Of course, many people reckon that with VAPO on board, VPCO will manage to get back to its feet, but this can only happen if the merger is completed. And as of right now, it’s not.
The press release and the accompanying 8-K forms tell us that the two companies have executed only the term sheet of the merger. The actual definitive agreement should be closed on or before December 21. What does that mean?
It means that if you are jumping in right now, you should really be confident in VAPO‘s ability to close the deal. It means that you should trust the management team. And we’re pretty sure that some people don’t.
When the company changed its business plan back in February, a person called Scott Frohman took the helm and this name should sound familiar to those of you who have followed the penny stock world over the last few years. Mr. Frohman was once in charge of Options Media Group Holdings, Inc. (OTCMKTS:OPMG) and when he was there, his company became quite famous because none other than Justin Bieber got involved in pumping it. Right now, OPMG is firmly anchored to the bottom of the chart and it looks like nothing can drag it out of the mud.
He was also once at the helm of a company called Money4Gold Holdings, Inc. (MFGD) (currently known as usell.com Inc (OTCMKTS:USEL)) and his endeavors back then weren’t particularly successful either.
So, does that mean that jumping in on VAPO is a bad idea? No, it doesn’t. It does, however, warrant some extra caution.
