- (PLX AI) - Swedish Match shares are set to take a beating today after the company suspended the preparations for the contemplated cigar unit spin-off until further notice, analysts said.
- • Swedish Match decision was prompted by regulatory uncertainties facing the cigar business after the US Food and Drug Administration (FDA) ruled that substantial equivalence (SE) designations should be denied for applications corresponding to about 3 percent of Swedish Match's 2021 cigar volume
- • This is no doubt very bad news for Swedish Match and the shares are likely to react very negatively, Carnegie said
- • The board's decision to postpone the cigar flotation illustrates the potential severity of the FDA's ruling, Carnegie said
- • Swedish Match can appeal the FDA decision and in the meantime continue to sell the products
- • But another FDA decision is expected soon on an unrelated flavor ban
- • Swedish Match may soon face a ban on up to 50% of its products on top of the 3% of products banned yesterday, Carnegie said
- • We would expect this process to be a lengthy one, potentially taking years, Bank of America analysts said
- • Importantly, for the duration of the process Swedish Match will be able to continue to sell the cigars affected by SE denial: BofA
- • A potential ban on flavored cigars would be manageable, as the adverse impact on volumes could be compensated via price increases in the rest of the cigars portfolio, BofA said
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