Big Tobacco stocks soar amid FDA accusations targeting vaping, juuling
Tobacco stocks soared to new highs immediately following an announcement by the U.S. Food and Drug Administration (FDA) accusing the American vaping industry of poor business practices. British American Tobacco stocks jumped sharply by 6.9 percent while Altria Group shareholders experienced a 7 percent impulse simultaneously. Philip Morris also came out a big winner, soaring to its highest ticker price in about three years. This cumulative rally is Big Tobacco’s largest in over a decade.
What led to this strange set of events? On Wednesday, September 12, an FDA press announcement stated that agency officials had recently sent some 1,100 warning letters to vape vendors around the country accused of allegedly participating in illegal underage sales. Another 131 civil violations were also issued, each with some sort of financial penalty.
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Accusations that teen juuling acts as a gateway to adult smoking have plagued the vaping industry for years. In the past several months, the FDA under direction of the Trump-appointed commissioner Scott Gottlieb has issued several unofficial pleas for self-regulation. In fact, in late February 2018, Chief Gottlieb posted a rather ominous 42-word tweet that got the full attention of vaping advocates around the country.
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The tweet implying “stop selling to kids...or else” was only a predicate of things to come. Just a month later, the FDA announced the launching of a federal probe into the pros and cons of flavored e-liquids. Agency officials had apparently been receiving a rash of complaints that e-liquid companies were perhaps intentionally targeting the marketing of their products to teenagers by using candies, cartoons, and other kid-appealing imagery in their advertising strategies. The probe ended in mid-July amid allegations that the FDA website received over one-quarter of a million spammed comments by anti-vaping activists.
By the FDA’s actions of constantly shining a negative spotlight on the American vaping industry, the conspiracy theory that Big Tobacco and political officials are somehow in cahoots is once again beginning to rear its ugly head. Meanwhile, tobacco company investors and shareholders have grown increasingly concerned that the widespread popularity of e-cigarettes – particularly Juuls - will eventually and negatively affect the price of associated stocks. Bloomberg reports that “if the (vaping) ban were to happen, Altria Group is mostly likely to benefit,” according to Wells Fargo analyst Bonnie Herzog. The FDA announcement of last Wednesday seems to have temporarily curtailed this potential Big Tobacco stock crash for the short term.
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