March 24, 2014: Why I bought MCIG's Dip!(edit)
Introduction to the Short mCig Argument
Earlier today, SeekingAlpha.com (SA) certified writer Charles Moscoe
wrote an article titled:
Buy mCig and Turn Your Cash Into Vapor.
I commented that I was too busy buying the dip (at .69 and .71) to fully reply but would later.
Above is a link to the article. The gist of it was in the first bullet points the author provided:
Why Private Trader is Long mCig
I saved a copy of this article, and am writing a response to it, because it sent the price of mCig down over 10% in one day.
Ironically, SA's editors wouldn't allow me to publish positive articles on Netlist, but they allowed Moscoe to publish a one-sided article on mCig.
*For reasons why I no longer bother submitting Instablogs or articles to SA, please read this:
Point by point I will rip Mr. Moscoe's 4 main points to shreds. Once shredded, you can stuff them into your mCig and smoke'em!
1) Sales and Profit Margins for mCig Have Just Begun:
CEO Rosenberg HIMSELF said that the sales were figures were "modest relative to our current valuation" and noted that these sales were generated over only 14 inventory days for their latest mCig 2.0 product. For more detail, including the fact that PROFITS, not just sales, are part of the CEO's long term plan, please read: http://finance.yahoo.com/news/mcig-inc-achieves-first-quarterly-191549298.html.
No one can reasonably expect a start up company to generate so many sales in the first 14 inventory days of its latest product that it could buy all its stock back.
I invested in mCig with it in mind that it might take awhile for it to generate sales. And, I don't think it's even started to put VitaCigs on the market. Vapolution also may have been on the market, but was not being marketed by mCig (and that may be why its not sold much).
As far as I'm concerned, when I look at mCig's website, such as:
it appears to have an excellent ability to market its stock and products. And it has not incurred crippling debt that is likely to keep other mCig's competitors out of the NASDAQ. mCig's goal is to become a NASDAQ company - this cannot happen overnight from one quarter's sales.
2) The mCig 2.0 is Proprietary Technology.
Even if the product is made in China, and designed in the US, please explain how that is not proprietary?
Please note: the author fails to mention what other company has an eCig with the unique ability to vaporize both plant product and nicotine. Without some facts or examples, I can only continue to believe that mCig has proprietary rights to mCig 2.0.
3) VitaCig has potential as a trendy, fun, nicotine free way for college kids to look retro cool at parties.
Sorry, but humans like to try new things. At one time Coca-Cola could have been described as a "low demand product with poor packaging in a highly competitive market". Arguably, Coke had to compete with water, milk, beer, and a lot of other beverages to become what it is today. If the first packaging of Coca-Cola was perfect, then why has the packaging and marketing been changed over 100 times since then?
Ironically, while VitaCig may have zero health benefits, it might actually be a fun way for people to swallow vitamins. Vitamins can be hard, difficult, or unpleasant to swallow. I have no idea, but I think the product might be worth a try.
Last but not least, I've met many people who say they "only smoke at parties." I think a lot of times they just want to look cool, not start an addiction to nicotine. So this could be the way that they can look cool. College students would probably be the target market. College students have bought crazier things than VitaCigs.
4) Vapolution Sales Are Likely to Increase Under mCig's Management.
Vapolution was only recently acquired by mCig. The product appears here:
mCig may have paid too much for Vapolution, but it's hard to say at this time. We know that the CEO did not dilute or incur debt to acquire Vapolution. The acquistion tends to show that the mCig team is better at marketing and business than the Vapolution team.
To be fair, we need to give Rosenberg and the mCig team a chance to market Vapolution before we can say that sales are bad. Vapolution and similar products are new and many potential consumers are just learning about this type of technology. As word spreads some may find this product fits their needs better than the mCig.
SOME CATALYSTS & TIMING:
My understanding is that lately the Nasdaq and SP500 have been trending down. This may have an impact on mCig, even though it could be at a great price right now relative to future earnings. Also, several near term catalysts are likely to increase mCig's share price.
1) March 26, 2014 - Oaksterdam University marketing event.
2) Unknown Dates - Increased Partnerships for Retail Distribution
3) Marketing of VitaCig - More is likely to be done on this. Again, I see the target demographic as college students. Certain oils / vitamins can probably help folks stay up, focus, and write those overnighters!
4) Spin off of VitaCig Shares. My understanding is for every 1 share of mCig, investors will get 1 share of VitaCig. Investors who are normally short-term investors, may hold longer term, or partial positions long term for that. That tends to mean that some shares will not budge in price. I hope that Rosenberg postpones the release of VitaCig shares for as long as possible - perhaps wait till mCig shares hit $6.
5) Likely penetration of the $1 threshold. Just before this article, mCig was on track to rise to the $1- $2 / share range. Likely delayed not denied.
In a bad market, defensive stocks, such as cigarette stocks, tend to do well. As the US job market continues to struggle, people are likely to still smoke - and perhaps vape as a healthier alternative. Imagine getting into Phillip Morris at the beginning!
6) Model and marketing improvements. I would not be surprised if there is a mCig 3.0 at some point in the future.
My understanding is that some smokers say vaping is more dry than regular cigarette smoking. Perhaps some models / oils / etc will make vaping a more similar or pleasant experience. Each improvement is likely to bring more consumers to at least try the product.
Another marketing tactic might be to make it available in partnership with websites that accept bitcoin. According to its site, you can use bitcoin to buy mCig.
It might be neat to see the mCig team take this to the next level by offering some lucky purchaser a free bitcoin in a special gift package of 5 mCigs or something like that.
7) Marketing this stock to over $5 / share for NASDAQ entry appears to be a a reachable goal if mCigs and and vaporizers are properly marketed. And the CEO so far has incurred no debt and has not announced dilution plans. Maybe dilution will be necessary, but in this case, this CEO does not seem to be acting like the usual pump and dump CEOs who have no hope getting into NASDAQ.
8) If it goes to over $5-$6 / share, institutional investors and/or large cap acquirers, are likely to raise share prices higher.
Bias: I am currently long MCIG. On March 24, 2014 I bought MCIG as high as approximately .81 / share, and when it dipped, I bought more at .69 / share. If it dips again, I may buy more. Disclaimer: The above is not financial advice nor recommedation. My position in this stock may change at any time.