BAT's July 2 Reckoning: FDA Inquiry Tests Investor Nerves After H1 Update Disappoints
05.06.2026 - 18:10:13 | boerse-global.de
British American Tobacco is navigating a dual crisis this month, as a US Senate probe into the agency that regulates its next-generation products collides with an H1 trading update that sent shares sliding. The company had barely finished celebrating a more lenient FDA stance on vaping when six Democratic lawmakers demanded answers about the decision-making process, threatening to reverse the very regulatory opening BAT had welcomed.
The turbulence has been brutal for the stock. On Tuesday, shares plunged as much as 8.8 percent in early London trading, bottoming out at 3,894 pence after the pre-close update for the first half. The session eventually closed at around €50.28, but the selling resumed later in the week. By Friday the stock had slipped to €49.85, down 0.86 percent on the day and 5.34 percent over seven sessions. The 52-week high of €57.50 now sits 13.3 percent away, and the relative-strength index of 35.7 points to mild oversold conditions.
The H1 update itself contained three major disappointments. Management flagged that a larger-than-expected portion of full-year earnings will fall into the second half, a shift that adds execution risk. The outlook for glo heated tobacco was revised lower due to inventory destocking in Japan and heavy competition in the value segment. Most jarring for investors, the forecast for global cigarette volumes was cut from a decline of roughly 2 percent to around 2.5 percent, underscoring the structural headwinds facing its legacy business.
Just two days after that sobering update, the political storm erupted. On June 4, Senators Dick Durbin and Elizabeth Warren, together with four other Democrats, sent a letter to Reynolds American—BAT's US subsidiary—and to Altria demanding details of any contacts with the Trump administration over the FDA's new "enforcement discretion" policy. That guidance, announced in late May, allows manufacturers to sell vapes and nicotine pouches without the legally required authorisation, provided their applications meet certain standards. The FDA itself acknowledged the move could bring hundreds of new products to market and was made after pressure from the White House.
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The senators see a clear pattern. Reynolds American recently donated $5 million to political funds aligned with Donald Trump, and Altria also contributed. The lawmakers want to know whether those donations influenced the timing of the FDA decision. They have given the companies until July 2 to respond, demanding specifics on how many unauthorised e-cigarettes could reach the market under the new policy.
BAT had done little to disguise its enthusiasm for the regulatory shift. In the same June 2 pre-close update, the company explicitly welcomed the FDA's prioritisation guidance, calling it an important step toward expanded market access. Altria praised the policy as a move against the illegal market, while a White House spokesman cited recent evidence that nicotine pouches and vapes can help adults quit smoking.
The irony is that the underlying performance of BAT's smokeless business remains strong. The company raised its full-year revenue growth forecast for the New Categories segment from low-double-digits to mid-teens. Velo Plus, its modern oral product, saw its US volume share jump 10.4 percentage points. Vuse, the vaping brand, extended its global value-market leadership in key territories by another 1.3 points. These gains stand in stark contrast to the gloomier narrative from the trading update.
For the full year, BAT held its guidance at the lower end of its medium-term ranges: revenue growth of 3 to 5 percent, adjusted operating profit growth in line, and adjusted diluted EPS growth of 5 to 8 percent. It remains on track to cut net debt to between 2.0 and 2.5 times EBITDA by year-end. The first-half adjusted pre-tax profit is expected at £4.76 billion.
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Analysts remain broadly supportive despite the near-term noise. BofA Securities retained its buy rating with a price target of 5,300 pence, although it noted weakness in the Asia-Pacific, Middle East and Africa region missed expectations, dragged down by Bangladesh and heated-tobacco struggles. UBS also kept a buy call with a 5,750 pence target. A management reshuffle is on the horizon: Dragos Constantinescu, former CEO of Asahi Europe & International and a 16-year BAT veteran, will take over as chief financial officer on September 1 with a base salary of £820,000.
Investors now have two key dates circled. July 2 is the deadline for Reynolds American and Altria to answer the Senate letter, potentially escalating the political fight. July 30 brings the full half-year results, when the market will see whether the second-half weighting delivers as promised—and whether the smokeless story can finally drown out the regulatory and legacy drag.
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