Tobacco Stocks Jump Following FDA Warning to E-Cig Companies

Following the U.S. Food and Drug Administration’s (FDA) recent announcement, saying that it sent warning letters to e-cig companies in an attempt to combat youth vaping, tobacco stocks are rallying the most they ever have in the last decade.

Diane Caruana

September 14, 2018

Last Wednesday, the FDA announced that it issued over a 1,000 warning letters to U.S. retailers and manufacturers of e-cigarettes, in what the agency called “the largest coordinated enforcement effort in the FDA’s history.”

In the letters, the agency is demanding that within 60 days, these companies, namely Juul, Vuse, MarkTen XL, blu e-cigs and Logic, present proof that they are able to keep the nicotine-containing products out of the hands of minors. Should they fail to do so, the FDA may ban candy-like flavors, such as bubble gum and crème brûlée, that may be particularly appealing to this age group.

A loss for public health and win for big tobacco?

Altria Group and British American Tobacco have gained the most intraday since 2008, rising as much as 7.7 percent and 6.9 percent, respectively.

An article on Bloomberg has reported that as a result of this, Altria Group and British American Tobacco have gained the most intraday since 2008, rising as much as 7.7 percent and 6.9 percent, respectively. Similarly, Philip Morris rose the most in over three years.

Given the popularity of e-cigarettes, tobacco investors had grown increasingly concerned that as successful e-cigarette companies such as Juul continue expanding, the major cigarette producing companies were doomed. However, the FDA’s actions have rightly brought newfound hope to such investors.

More FDA’s actions that benefit only Big Tobacco

Wells Fargo analyst Bonnie Herzog explained that if the ban were to happen, Altria Group is mostly likely to benefit. “Given the market’s overarching concerns about Juul’s impact on cigarettes, especially Marlboro, we think a potential ’ban’ on Juul would be positive for MO,” Herzog wrote.