BAT Investigated for Fraud After Write Down

Investors have asked Pomerantz Law Firm to investigate British American Tobacco for securities fraud after the company announced it would take an impairment charge of approximately $31.5 billion after reassessing the value of certain of the company’s U.S. cigarette brands. On this news, BAT’s stock price fell sharply during intraday trading on Dec. 6, 2023.

The company said the charge—one of the biggest corporate write-downs in recent years—mainly relates to U.S. brands it acquired, as it assesses their carrying value and economic usefulness in the years to come. The brands being written down include Newport, Pall Mall, Camel and Natural American Spirit.

The decline in U.S. cigarette sales has been driven not only by growing health awareness and mounting regulations but also by economic challenges, with consumers downtrading to cheaper brands or illicit products. These trends prompted BAT to adjust the way some of its U.S. brands are treated on its balance sheet, shifting their value to a finite lifetime of 30 years.

Chief Executive Tadeu Marroco described the move as “accounting catching up with reality.”

While he does not believe cigarettes will disappear in 30 years, he said it was no longer possible to justify an indefinite value for those brands equating to around $80 billion on BAT’s balance sheet.

BAT added that it would start amortizing the remaining value of its U.S. combustibles brands in 2024, making it the first of the major cigarette players to acknowledge that its tobacco brands’ value had an expiry date.