Investors Sue British American Tobacco for Fraudulent Impairment

A class action lawsuit has been filed against British American Tobacco p.l.c (BA Tobacco), accusing the company of misleading investors about its financial performance and the value of its cigarette brands. The lawsuit seeks to recover losses of more than $100,000 for investors who bought or acquired the company’s securities between February 9, 2023 and December 6, 2023.

The lawsuit, filed in the United States District Court for the Eastern District of New York, claims that BA Tobacco and some of its executives violated federal securities laws by making false and misleading statements and omissions about the company’s business, operations, and prospects. The lawsuit alleges that the company failed to disclose that:

  • It was facing significant macro-economic headwinds that were negatively impacting its U.S. combustibles business, such as declining cigarette consumption, increased competition, and regulatory pressures.
  • It had overpaid for the cigarette brands it had acquired from Reynolds American Inc. in early 2017, and that these brands were losing market share and profitability.
  • It was facing a substantial impairment charge on these brands, which would significantly reduce its earnings and assets.

The lawsuit claims that these facts were concealed from the investing public, and that the company’s securities traded at artificially inflated prices during the class period.

The Disclosure of the Impairment Charge

The truth began to emerge on December 6, 2023, when BA Tobacco announced that it was taking a 25 billion Pound (around $31.5 billion USD) impairment on the cigarette brands it had acquired from Reynolds American, due to the challenging conditions in the U.S. market. The company said that its performance in the U.S. had been hindered by smokers switching to cheaper, nonpremium brands, and that it expected further declines in the future.

The Wall Street Journal described the impairment as “one of the biggest corporate write-offs in recent history,” and noted that it raised questions about the company’s strategy and valuation. The Journal also reported that the impairment had triggered a review by Moody’s Investors Service, which could downgrade the company’s credit rating.

On this news, the price of BA Tobacco’s American Depositary Receipts (ADRs) fell $2.68 per share, or 8.88%, to close at $28.86 per ADR on December 6, 2023, on unusually high trading volume. The lawsuit claims that this price drop caused significant losses and damages for the investors in the class.

The Lead Plaintiff Deadline and the Legal Options

The lawsuit seeks to appoint a lead plaintiff, who will represent the interests of the class members. The lead plaintiff is usually the investor with the largest financial interest in the case, and who meets certain legal requirements. The deadline to file a lead plaintiff application is March 25, 2024.

Investors who purchased or otherwise acquired BA Tobacco’s securities during the class period, and who suffered losses of more than $100,000, are encouraged to contact ClaimsFiler, a free shareholder information service, to learn more about their legal options. ClaimsFiler can help investors to file their own claims, or to join the class action lawsuit. Investors can also contact Kahn Swick & Foti, LLC, the law firm that is representing the plaintiffs, for a free case evaluation.

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