Ligett news is horrible for MO. My opinions on the news, and future for MO.
The united front of the big five tobacco co's has been broken. Liggett, though the smallest with only a 1.5% market share, opened a hole for the attorneys general to exploit. Their turning over of thousands of secret internal documents that may show that tobacco CEOs knowingly targeted young people, knew that their product is addictive, and knew that cigarettes are deadly is not good news. MO's motion to restrain Liggett from turning those sensitive documents over to the courts is an indication that those documents may be incriminating. Also, several years ago the execs of the tobacco industry testified before congress stating that their product was not addictive, not aimed at young people, and not deadly. But if documents are turned over to the attorneys general of the 22 states that state otherwise, then MO could have big problems with the upcoming cases.
Liggett bailed on the united front because of weakness. It does not have the financial support to absorb several losses to the class action suits filed by the 22 states, so it thought this was the best way out.
MO, on the other hand, has a lot of money and some of the best lawyers that money can buy. They, and the other four major tobacco companies, hope to win the upcoming cases based on past rulings. There is currently little pressure from the market for MO or the other tobacco companies to settle because they have won a great majority of the cases brought against them. But if Big MO starts to lose, beginning with the case in Mississippi in about 70 days, then the market, stockholders, will create the pressure for MO to settle to avoid future suits.
Regardless, MO is a good company for investing for the long haul. For the near term there will be increasing volatility as the court dates approach, and the cases actually go to trial. But a company which has revenues of some $100 billion a year is not going to go anywhere. Also, their overseas endeavors are expanding at a great rate. Once the US vs. tobacco battle is resolved, MO will reflect its true value since the 'tobacco' fears will be removed from the equation.
Long on MO!
geoff |
