Investing

The Philip Morris Party Comes Too Early (MO)

A federal appeals court is reviewing the decision to let a group of smokers file a class action suit about whether "light" cigarettes where marketed as being safer than regular smokes.

While it is hard to determine what damages the suits could bring to tobacco companies if they were successful, the plantiffs claim that big tobacco brought in between $120 billion and $200 billion in "light" sales. Why their lawyers cannot get to a number in a slightly tighter range is hard to understand.

Shares in Altria, parent of the largest tobacco company Philip Morris rose almost $1.50 to just under $85 on the news.

As the litigation has favored Altria and its counterparts, the company’s stock has gone from $28 in May 2003 to the current level.

But, the "light" cigarette wrinkle is fairly new. Older suits were based on the simple premise that tobacco companies hid the risks of smoking and marketed products that they knew were dangerous. The treachery alleged here is a bit more subtle. And, perhaps more complex.

Altria is at a high, but the fat lady has not sung. There is still a far amount of risk.

Douglas A. McIntyre can be reached at [email protected]. He does not own securities in companies that he writes about.

 

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