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Gates says divestment will not lower carbon emissions. This is very different from saying it will not lower valuation. Has the reduction in tobacco companies'

• ggm 7y ago
  I'm less sure. Juul would say that redirecting nicotine addicts to vaping over smoking has probably altered rates of uptake of smoking, and the market backs Juul and vaping which has led big tobacco to diversify and invest. Oil and Coal ventures who own the underground asset have the choice of converting from gasoline production to feedstock for plastics and pharma and fertilizer, or just leaving it in the ground for future valuation. If they don't get capital raising its more expensive for them to develop new fields. I guess in some sense the de-carbonisation probably doesn't sheet home solely to investment decisions in coal and oil but I doubt its un-connected.
  • gridlockd 7y ago
    ...but that's exactly Gates' point: Invest into alternatives, and if those alternatives turn out to be competitive, affected stocks may fall in price, but more importantly consumption will fall. Cheaper stock prices just due to divestment will have pretty much zero impact on oil demand. Why should it be any other way?
• triggercut 7y ago
  precursory note: Not an analyst - just read a lot of tobacco industry reports Over the better part of the last decade, many tobacco stocks are down (BAT, PMI, RT, JT etc,) however most dividends on their common stock are still increasing YoY. Not certain if it's generally above the market average but seems to be more than not. If you look at long term production rates (sticks shipped) cigarette manufacturing has been dropping YoY for years. But this is because there is a general drop in demand from higher socioeconomic countries generally and as consumers switch to "smokeless" "next-gen" alternatives. My observation is that single sticks are usually sold at a much higher price in those markets (sometimes due to tax and regulation, but mostly due to local market value), whereas they are sold closer to cost of production in lower socioeconomic countries where they target larger volumes per consumer. It's difficult to paint a picture from the data released in annual reports and market updates around what the transition (sticks -> e-cig consumable units) looks like and is perhaps purposefully obfuscated and will probably remain that way until forced otherwise. As such, relative points of comparison make their day to day activities harder to judge over the last few years but what everyone IS doing is huge amounts of M&A, Research and Capital Expenditure to meet this strategy whilst not raising capital from equity as their share price drops yet maintaining higher dividends. Why? Because they are cash rich. Much more generally, from a business perspective, what's happening in the tobacco industry is fascinating (and equal parts horrifying depending on your point of view) as these paragons of global supply chain pivot to become consumer electronics companies.
  • clomond 7y ago
    Note, that as a general rule of thumb - large dividends by companies is essentially the company saying "we can not make use of this cash better than you, here - take it". This can be common in "mature" markets where it is hard to justify returns on additional investments in growth. Better to just return the cash generated to shareholders.