British American Tobacco p.l.c (NYSE: BTI), one of the world’s largest tobacco companies, is facing a class action lawsuit from investors who claim that the company misled them about its financial performance and prospects in the U.S. market. The lawsuit alleges that the company failed to disclose the impact of macro-economic headwinds and consumer preferences on its cigarette brands, resulting in a massive impairment charge and a drop in its share price.
The class action lawsuit was filed on behalf of investors who purchased or otherwise acquired the securities of British American Tobacco (BA Tobacco) between February 9, 2023 and December 6, 2023, inclusive (the “Class Period”). The lawsuit is pending in the United States District Court for the Eastern District of New York, and the lead plaintiff deadline is March 25, 2024.
The lawsuit claims that BA Tobacco and certain of its executives violated federal securities laws by making false and misleading statements and omissions about the company’s financial condition and outlook, especially in relation to its U.S. operations. The lawsuit seeks to recover damages for the investors who suffered losses as a result of the defendants’ alleged misconduct.
The Allegations against British American Tobacco
According to the complaint, BA Tobacco acquired Reynolds American Inc. in early 2017, becoming the second-largest tobacco company in the U.S. market. The company touted the acquisition as a strategic move that would enhance its growth and profitability, and assured investors that it had a strong portfolio of premium cigarette brands, such as Camel and Newport, that would withstand the challenges of the U.S. combustibles industry.
However, the complaint alleges that the defendants failed to disclose that the company’s performance in the U.S. was adversely affected by macro-economic headwinds, such as declining smoking rates, increased regulation, and higher taxes, as well as by changing consumer preferences, such as the shift to cheaper, nonpremium brands and alternative products, such as e-cigarettes and heated tobacco devices. The complaint further alleges that the defendants knew or recklessly disregarded that the company’s cigarette brands were losing market share and value, and that the company would have to take a significant impairment charge on its goodwill and intangible assets.
The Disclosure and the Market Reaction
On December 6, 2023, BA Tobacco shocked the market by announcing 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 “macro-economic headwinds impacting the U.S. combustibles industry.” The company also lowered its guidance for revenue growth and operating margin for the full year 2023.
The Wall Street Journal described the impairment as “one of the biggest corporate write-offs in recent history,” and noted that the company’s statement indicated that its performance in the U.S. had been hindered by smokers switching to cheaper, nonpremium brands. The Journal also reported that the impairment raised questions about the company’s strategy and valuation, and that some analysts had warned that the company had overpaid for Reynolds American.
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 ADRs have continued to decline since then, trading as low as $26.50 per ADR on February 13, 2024.
How to Join the Class Action Lawsuit
Investors who purchased or otherwise acquired the securities of BA Tobacco during the Class Period and suffered losses in excess of $100,000 are encouraged to contact ClaimsFiler, a free shareholder information service, to learn more about their legal options and how to join the class action lawsuit. ClaimsFiler can be reached at 1
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