After a roller coaster move that pushed Elev8 Brands Inc (OTCMKTS:VATE) to touch the 52-week highs of $.15 before going back to $.02, the share price is gaining traction once again. Trading volume is also waking up, as almost 20 million shares have changed hands in the last 5 days. Have a look at the price action below:
The stock is currently trading at the $.03 handle close to the $.05 psychological level. A close above the $.05 handle could mark the beginning of another upward trend, which could bring the price to the $.10 mark. However, failure to break the key resistance level could see the stock retracing to the $.02 handle seen as the immediate support level, below which the stock could drop to the $.01 handle. The recent price action is more clear in the following 1-month chart:
Before we assess whether the stock gains will continue, let’s review what VATE does to enhance shareholder value. The company specializes in the development and marketing of products for the fitness and wellness markets. More precisely, Elev8 Hemp LLC, which is a subsidiary of VATE, is focused on the development and marketing of hemp-based food, beverage, and healthcare products including hemp coffee, hemp water, and hemp-based skin care products.
The products are distributed through physical stores as well as online. As noted in other pieces, the company has been successful in distributing via Amazon Prime. Check the following image from the popular online retailer:
VATE is reducing the share count
While the new year 2018 has been, so far, very beneficial in terms of new announcements, it seems that the company does not want to stop pumping out good news. In March, VATE decided to retire over 200 million shares of common stock, so the current amount of shares issued and outstanding, as of March 13, 2018, is 363,232,031.
Let us make some numbers to understand what is meant by the reduction of the share count. The company’s net asset reported in the last 10-k is equal to $0.103 million. Thus, reducing the number of shares outstanding means that each share is now worth $0.000515 more ($0.103/200 million shares). With the shares trading at $.05 right now, it does not seem a small amount of money.
On the top of it, the optimism seems to be at its highest level inside VATE. Read the most recent news said by the CEO Ryan Medico:
“Coming out of February, being our best month in sales to date, we are extremely positive in the direction the company is heading. I will personally be updating everyone on the exciting progress of the company via CEO Letters on the OTC Markets within the week.” Source
While we believe that the share count reduction was the most recent catalyst that triggered the share price, the most recent products released should be helping too. Please remember that in February, VATE released three new Elev8 Hemp Coffees and 300mg Zoe CBD Tinctures. As noted in previous articles, additional products increase the expected future revenues, and it is obviously appreciated by the market.
In our opinion, with these couple of announcements in February and March, the company may have created certain momentum in the share price, which could last some more weeks. But, that’s not all. In our experience, companies that send a few good news to heat the market continue to do so for some time. If the company has decided to communicate more and better than before, it will continue doing so. These are two very good reasons to believe that the upward trend in the share price could go on.
Low Float Runner
We need to mention since we have not done it in other pieces, that the company’s share structure is beneficial for volatility lovers. We know that many of our readers are volatility strategists; always looking for tickers like VATE. With 488,285,396 shares outstanding and a float equal to 139,187,982 shares, the order book is expected to be empty. Thus, big market orders may move the share price significantly creating a lot of volatility in the market.
Currently trading with a market cap of $22 million, VATE is an interesting story among small caps. With the next quarterly release expected soon, we need to draw the attention of our readers to the following. The company noted, in previous months, the opening of new stores, and the release of new products. As a result, we will be expecting a big surprise in the next sales report. Be sure to stay tuned to the company. The price swings could be very significant, and more gains could be coming.
Disclosure: We have no position in VATE and have not been compensated for this article.
Image courtesy of Carlos Gracia via Flickr.