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Tobacco stocks retreat
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July 8, 1999: 12:26 p.m. ET
Cigarette makers hurt by Fla. jury verdict, but analysts say appeals likely
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NEW YORK (CNNfn) - Shares of most top tobacco companies fell Thursday in the wake of a Florida jury's ruling that the industry is liable for smoking-related illness.
But showing resilience were shares of tobacco industry leader Philip Morris Cos. (MO), a Dow industrials component, which was up 1-3/16 to 39-1/16 after falling 2-5/8 on Wednesday.
The verdict late Wednesday by the state court, which moves the class-action trial into a damage phase, could lead to billions of dollars in costs for tobacco companies. But analysts said the ruling has left open many outlets for appeal, and its class-action status could be thrown out.
Taking blows on Wall Street at midday were Brooke Group Ltd. (BGL), parent of Liggett, down 1-7/16 to 22-1/16, about 6.1 percent; RJ Reynolds Tobacco Holdings (RJR), off 1-1/8 to 29-3/4; UST (UST), losing 3/8 to 30-7/16; and the American depositary shares of British American Tobacco (BTI) down 9/16 to 17-3/4.
The generally poor showing on Wall Street followed a stable performance from some top tobacco companies in London trading Thursday.
The six-person Miami jury, which deliberated for a full week, found the tobacco companies engaged in concealment, fraud and negligence in covering up the health risks of smoking.
The class action suit, spearheaded by the husband-and-wife legal team of Stanley and Susan Rosenblatt, represented between 40,000 and 1 million plaintiffs, according to the Wall Street Journal.
Still, tobacco analysts said, there are hurdles galore before any payday arrives for the plaintiffs. There are nine individual plaintiffs representing the class -- and each plaintiff's claim will be judged separately in the second phase of the trial, one analyst said.
"There [are] still a lot of levels that we need to go through as far as the appeal process is concerned to really determine whether or not this class action will continue," said Timothy Swanson, a tobacco analyst with A.G. Edwards & Co.
Swanson said while such jury verdicts often unsettle long-term investors by knocking down the stock prices, "generally these pullbacks in the share price offer buying opportunities."
Last November, tobacco companies came to a wide-ranging $246 billion settlement with 46 state attorneys general on the heels of a $40 billion pact with the other four states. But the larger deal didn't bar individual claims against the industry.
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