Supreme (LON: SUP) shares are down 15%. SUP shares fell because the government has decided to ban disposable vapes. This is, of course, an entirely silly decision - elite virtue signalling at its worst. But given that the decision has been taken it has to be dealt with.
As is being reported: “Shares in Supreme plc have been slashed as plans to ban disposable vapes to help protect children are being drawn up by the Government. The Manchester-headquartered consumer group, which also sells vitamins, has seen the value of its shares cut by more than 16% in early trading this morning (September 12).”
That we know this is a stupid idea is because it has been supported by Greenpeace. That’s a true test - they’re in favour, all sensible people are against. Whatever it is. Their argument has been that as much as 10 tonnes of lithium is used in the batteries each year. The world contains 285,000,000,000 tonnes of lithium - 10 is not a problem. But, you know, elite virtue signalling.
Supreme share price from Google Finance
The other idea is that vaping leads to smoking - which is to get this entirely the wrong way around. Vaping is a substitute for smoking cigarettes, not a complement to it. So, this decision will kill people in 30 and 40 years’ time - because some more will smoke who would not have.
But the effect upon Supreme. Well, as a domestic company they can’t sue for the destruction of their business - only international investors can do that. So, basically shareholders just have to put up with this. We would expect a corporate announcement soon enough. Detailing what the likely damage is going to be.
We can gain some idea from this: “Supreme (AIM: SUP), a leading manufacturer, supplier, and brand owner of fast-moving consumer products, announces that in June 2023 it was selected as a master distributor for the UK's leading vaping brands, ElfBar and Lost Mary.
Management, following initial order volumes, currently expects to generate £25 to £30 million of revenue and around £2 million of incremental Adjusted EBITDA1 for the year ended 31 March 2024 alongside an investment into working capital to support growth. The Company will supply ElfBar and Lost Mary products to some of the UK's biggest retailers, including Tesco, Morrisons, One Stop and WHSmith Travel, enabling the Group to develop cross-sell opportunities encompassing the entire Supreme product range.”
A rough guide would be 10 to 15% off annual earnings from this ban. So a 15% reduction in the Supreme share price looks sensible enough.
