According to Reuters on April 26th, the US government has accused British American Tobacco (BAT) of selling tobacco products to North Korea from 2007 to 2017, resulting in a fine of $635 million for the company. This could make it difficult for BAT to gain more popularity in the US market.
However, for this tobacco giant with a value of 82 billion dollars, paying a settlement of 635 million dollars plus interest may not cause a great financial loss. Although the investigation is ongoing, British American Tobacco confirmed a reserve of 450 million pounds last July and maintained that the final amount of the fine would not affect its annual profit expectations.
Despite this, investors still expect BAT to shift its listing location to the United States to narrow the valuation gap. According to data from Refinitiv, although British American Tobacco has higher profit growth, its current price-to-earnings ratio is only 8 times, compared to its US-listed peer Philip Morris International (PMI) with a ratio of 16 times. However, the reputation damage caused by fines has increased the risk of moving to the United States, and even if they do move, US investors may still discount its valuation.
Reference:
Sanctions hurt British American Tobacco's (BAT) hopes for a US listing.
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