British American Tobacco and Imperial Brands had £7bn wiped from their stock market value as US regulators prepare to crack down on the sale of flavoured e-cigarettes and menthol cigarettes.
Shares in BAT, the sixth-biggest company in the FTSE100 and maker of brands including Lucky Strike, Dunhill, Rothmans and Benson & Hedges, tumbled by 11%, sending its market value plummeting from £76bn at close on Friday to £69bn on Monday. The tobacco company’s share price has slumped by almost 40% over the last year.
The share price of Imperial Brands, maker of products including Lambert & Butler, Davidoff, Gauloises and John Player Special, fell by more than 3%. The £25bn company, the No 1 player in the UK market, had about £1bn stripped from its market value.
The US Food and Drug Administration will this week impose a ban on the sale of most flavoured e-cigarettes in tens of thousands of convenience stores and petrol stations across the US. The agency, which is trying to curb the huge increase in vaping among teenagers, will also impose age-verification requirements for online sales.
The FDA is also proposing a ban on menthol cigarettes, which, although it could take up to two years to be finalised and enforced, would be a major blow for BAT. It sells Newport, one of the most popular menthol brands in the US, through its subsidiary Reynolds American, which it picked up following a $25bn (£19.5bn) deal to buy Lorillard in 2015.
E-cigarette products in mint, menthol and tobacco flavours will still be sold in retail outlets in the US for now, because US officials did not want to create a situation where cigarettes were more attractive to smokers who prefer a mint or menthol flavour.
In 2013, the FDA concluded that menthol cigarettes are harder to quit and pose a greater health risk than regular cigarettes.
Last week, the Imperial Brands chief executive, Alison Cooper, told investors that the company was targeting ambitious growth plans at “next-generation products”; it owns the blu e-cigarette brand.
In June, San Francisco voters approved a proposition to ban the sale of flavoured tobacco products, including menthol cigarettes, in a battle in which tobacco company RJ Reynolds, a subsidiary of Reynolds American, contributed $12m against the measure.
Last year, BAT re-entered the US market after a 12-year absence with the $47bn acquisition of Reynolds, owner of brands including Pall Mall, Newport and Camel, in a move that created the world’s biggest tobacco company and was expected to speed up the development of e-cigarettes and vapes.