British American Tobacco, Altria shares rise after menthol ban proposal dropped

Investing.com -- Shares of British American Tobacco (BATS:LN) (NYSE: NYSE:BTI ), Altria Group (NYSE: NYSE:MO ), and Philip Morris International (NYSE: NYSE:PM ) each climbed on Friday, with British American Tobacco rising 1.3%, Altria Group up by 1%, and Philip Morris International also gaining 1%. The upward movement came following the Trump administration's decision to withdraw a proposal that would have banned menthol cigarettes, a move that was officially abandoned on January 21, according to government sources.

The Food and Drug Administration (FDA) had previously proposed a tobacco product standard aimed at prohibiting menthol as a characterizing flavor in cigarettes, citing public health concerns. The FDA had argued that menthol increases the appeal of cigarettes, particularly to younger demographics, and that the proposed ban would likely decrease youth experimentation and use, while also improving the health and reducing the mortality risk of current menthol cigarette smokers by encouraging cessation.

The withdrawal of this proposal has been seen as a positive development for tobacco companies, which had faced the prospect of losing a significant portion of their market, given the prevalence of menthol cigarette smoking in the United States. Over 18.5 million smokers aged 12 and older in the U.S. have been identified as consumers of menthol cigarettes.

The FDA's action was intended to address the leading preventable cause of death and disease in the country, aiming to reduce tobacco-related death and disease associated with menthol cigarette use. The agency also hoped to advance health equity by reducing tobacco-related health disparities.

As the proposal is no longer on the table, tobacco companies are likely to continue selling menthol cigarettes without the looming threat of a ban, which has been reflected in the positive stock movement observed today. The market's response suggests investor relief at the removal of a significant regulatory risk for these companies.

The news is particularly relevant for British American Tobacco, which, along with its industry peers, can now potentially avoid the financial impact that a menthol ban would have had on their sales and market share. This regulatory reprieve has provided a boost to their stocks as the market opens this week.

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Source: Investing.com