Re: British American Tobacco (BATS)

[dealtn]

Investments in other proven and profitable growth sectors will also ensure that BATS as a company has a much longer future. Many stakeholders in the company would see this as a good thing.

And there is nothing preventing those many stakeholders from pursuing that strategy. All that is needed is to take a stake in such alternative companies directly (and reducing their exposure in BATS if necessary). Thinking the best way is to have this done at a corporate level (with the byproduct it then isn't what other "many stakeholders" might want) is a fallacy.

Good company management is to provide a clear strategy and corporate plan for its stakeholders who themselves can then decide, with knowledge of that clear plan, on how they allocate their capital. Diversification (as with hedging for FX, interest rates, commodity pricing ...) can be, and is, undertaken at the investor level, if required (admittedly more difficult in many instances at retail investor level).

[Tara]

Investments in other proven and profitable growth sectors will also ensure that BATS as a company has a much longer future. Many stakeholders in the company would see this as a good thing.

And there is nothing preventing those many stakeholders from pursuing that strategy. All that is needed is to take a stake in such alternative companies directly (and reducing their exposure in BATS if necessary). Thinking the best way is to have this done at a corporate level (with the byproduct it then isn't what other "many stakeholders" might want) is a fallacy.

Good company management is to provide a clear strategy and corporate plan for its stakeholders who themselves can then decide, with knowledge of that clear plan, on how they allocate their capital. Diversification (as with hedging for FX, interest rates, commodity pricing ...) can be, and is, undertaken at the investor level, if required (admittedly more difficult in many instances at retail investor level).

Stakeholders in a company do not only include the shareholders. Employees for example are also stakeholders in a company and many of them may want their company to have a longer future.

And the idea that it would be somehow “wrong” for BATS to gradually diversify now in to other growth sectors is absurd. It would just be a different strategy to “managed decline” or as yet unproven “next generation products”. Is it wrong for Altria to have a large investment in AB InBev for example? Most of their stakeholders would likely say it is not wrong.

Billions have already been invested by tobacco companies in NGP with as yet unknown profitability and safety, and it is highly likely that in ten or twenty years time a similar size investment in another growth sector would have proven to be a far more profitable investment for shareholders.

[simoan]

Stakeholders in a company do not only include the shareholders. Employees for example are also stakeholders in a company and many of them may want their company to have a longer future.

You forgot the most important stakeholders of all - bond holders. If push comes to shove they’ll be the ones calling the shots.

And the idea that it would be somehow “wrong” for BATS to gradually diversify now in to other growth sectors is absurd. It would just be a different strategy to “managed decline” or as yet unproven “next generation products”. Is it wrong for Altria to have a large investment in AB InBev for example? Most of their stakeholders would likely say it is not wrong

You make it sound like Altria is a great company doing great things, when in fact it has just had to write down its $12.8 bn investment in Juul, and rumour has it that they are likely to dump their holding in AB InBev to make use of the enormous loss for tax purposes. Companies that diversify from their main business area of expertise are rarely successful in doing so.

[Tara]

The huge write down by Altria in Juul is an excellent example of the huge investment that has been made in NGP with no guarantee of future profitability or future safety. The regulators will continue to regulate against NGP on health and safety grounds, and the lawyers will continue to bring big lawsuits against tobacco companies like Altria and BATS.

What a waste of shareholders money.

It would probably have been far better for Altria shareholders if Altria had used the $12 billion invested or wasted on Juul, to increase their investment in AB InBev by $12 billion, or to invest in some other company in a growth sector. And the same can probably be said for the billions that BATS has already invested or wasted in NGP.

[Dod101]

Stakeholders in a company do not only include the shareholders. Employees for example are also stakeholders in a company and many of them may want their company to have a longer future.

You forgot the most important stakeholders of all - bond holders. If push comes to shove they’ll be the ones calling the shots.

And the idea that it would be somehow “wrong” for BATS to gradually diversify now in to other growth sectors is absurd. It would just be a different strategy to “managed decline” or as yet unproven “next generation products”. Is it wrong for Altria to have a large investment in AB InBev for example? Most of their stakeholders would likely say it is not wrong

You make it sound like Altria is a great company doing great things, when in fact it has just had to write down its $12.8 bn investment in Juul, and rumour has it that they are likely to dump their holding in AB InBev to make use of the enormous loss for tax purposes. Companies that diversify from their main business area of expertise are rarely successful in doing so.

Quite right and as I said upthread, BAT has already tried diversification and reversed out of all of it.

Dod

[Tara]

You forgot the most important stakeholders of all - bond holders. If push comes to shove they’ll be the ones calling the shots.


You make it sound like Altria is a great company doing great things, when in fact it has just had to write down its $12.8 bn investment in Juul, and rumour has it that they are likely to dump their holding in AB InBev to make use of the enormous loss for tax purposes. Companies that diversify from their main business area of expertise are rarely successful in doing so.

Quite right and as I said upthread, BAT has already tried diversification and reversed out of all of it.

Dod

Well the diversification by BATS in to NGP certainly looks less promising than the previous diversification in to insurance. At least Eagle Star and Farmers were successful and profitable companies.

Altria bought Juul for over $12 billion and they have now had to write the investment down by over 95%. And no reason to think that BATS diversification in to NGP will be any more successful. It has already cost them many billions.

What a shocking waste of shareholders money.

[Dod101]

Quite right and as I said upthread, BAT has already tried diversification and reversed out of all of it.

Dod

Well the diversification by BATS in to NGP certainly looks less promising than the previous diversification in to insurance. At least Eagle Star and Farmers were successful and profitable companies.

Altria bought Juul for over $12 billion and they have now had to write the investment down by over 95%. And no reason to think that BATS diversification in to NGP will be any more successful. It has already cost them many billions.

What a shocking waste of shareholders money.

If you feel so strongly about it, I suggest that you get to the AGM and/or write to the Chairman, or of course, just sell your shares.

Personally I find the good and increasing dividend to be very attractive to me but I acknowledge that it depends what you are looking for.

Dod

[dealtn]

It would probably have been far better for Altria shareholders if Altria had used the $12 billion invested or wasted on Juul, to increase their investment in AB InBev by $12 billion, or to invest in some other company in a growth sector. And the same can probably be said for the billions that BATS has already invested or wasted in NGP.

it would probably have been even better for it to distribute that $12billion to its shareholders. Each of them could have decided how they best wanted it invested (or not). Anyone thinking of investing it in AB InDev could have done so.

Directors are "agents" of the shareholders, but rarely act as such confusing their interests, and incentives, over their masters.