MO will never spin-off its tobacco industry. Just like RJR never gave in to pressures to spin-off its tobacco industry. Especially in the middle of all the trials and speculations, it would signal everyone that MO is admitting that its tobacco side has been lying all this time. No matter how bad the news gets, a spin-off would not happen.
The cases pending in the 22 class action suits, the FBI investigations, the Justice Department probing, all create the phenomenal volatility accompanying MO's stock price. Granted, things look bad, but to this point the market has not demanded, in a loud voice, for MO to settle with the government. Everytime MO wins a case, its lawyers look more invulnerable, thus we shareholders have not demanded that MO settles. Why settle when you're not losing?
The question is, will MO start to lose? Maybe, but we won't know until the juries are out. If an Achilles heel is found in MO, and it starts to lose cases, you had better believe that the market will start to scream for a settlement with the government.
This is primarily because of MO's fundamentals. Their fundamentals are good, the recent drop in MO's price has made it look tempting to long-term investors because of the 3-1 split in April, and the $8 billion stock buyback is a marked plus. As other people on this thread have noted, without all the court cases MO's share value would be a lot higher.
The sell-off won't last forever because MO is a strong, well-diversified company. The battle between the government and tobacco will not go on forever. It is fear that is driving the drop in price, and I for one welcome the exeunt of the shareholders with weaker stomachs.
Long on MO! |
