LO Acquires UK E-Cig Maker SKYCIG to Expand Internationally

  • LO announced this morning its acquisition of SKYCIG for £30MM in cash, plus an additional £30MM to be paid in 2016 based on the achievement of certain financial benchmarks
  • SKYCIG is a three year old UK based company with ~ 300,000 users that offers e-cigs in traditional and flavored offerings (including vanilla, cherry, and cinnamon)
  • LO has indicated the it plans to leave the current management in place
  • Among Big Tobacco, LO was first to the U.S. e-cig market through its acquisition of Blu in April 2012
  • LO currently enjoys the largest market share in the U.S.; today’s acquisition, while relatively small, allows LO to expand internationally in a developed and fragmented e-cig market
  •  We’ve expected Big Tobacco to look outside the U.S. shores for growth, and LO remains ahead of the pack, with both RAI and MO only releasing their e-cig brands in initial test states in the U.S. within the last two months
  • We believe there’s huge runway for the e-cig category in the U.S. and internationally, as we’re in the early innings of manufacturers creating brand awareness, identity, and appeal (for now consumer preference has been anchored on availability and taste)
  • We’re focused on what restrictions the FDA may place on e-cigs in the U.S. If, for example, the FDA decides to restrict online sales and/or flavored offerings, we believe that Big Tobacco and select e-cig manufacturers with strong retail relationships will stand to benefit 

Investment: we remain bullish on LO’s portfolio of full-flavored and menthol offerings and leading share in e-cigs. We’re cognizant that any restrictions that the FDA may place on menthol would have material negative implications for the stock. For now, we’re bullish on the stock over the immediate term TRADE and intermediate term TREND durations (see chart below).


LO Acquires UK E-Cig Maker SKYCIG to Expand Internationally - zz. lo

Cartoon of the Day: Hard-Headed Bears

How's this for "hard data"? So far, 107 of 497 S&P 500 companies have reported aggregate sales and earnings growth of 4.4% and 13.2% respectively.

read more

Premium insight

McCullough [Uncensored]: When People Say ‘Everyone is Bullish, That’s Bulls@#t’

“You wonder why the performance of the hedge fund indices is so horrendous,” says Hedgeye CEO Keith McCullough, “they’re all doing the same thing, after the market moves. You shouldn’t be paid for that.”

read more

SECTOR SPOTLIGHT Replay | Healthcare Analyst Tom Tobin Today at 2:30PM ET

Tune in to this edition of Sector Spotlight with Healthcare analyst Tom Tobin and Healthcare Policy analyst Emily Evans.

read more

Ouchy!! Wall Street Consensus Hit By Epic Short Squeeze

In the latest example of what not to do with your portfolio, we have Wall Street consensus positioning...

read more

Cartoon of the Day: Bulls Leading the People

Investors rejoiced as centrist Emmanuel Macron edged out far-right Marine Le Pen in France's election day voting. European equities were up as much as 4.7% on the news.

read more

McCullough: ‘This Crazy Stat Drives Stock Market Bears Nuts’

If you’re short the stock market today, and your boss asks why is the Nasdaq at an all-time high, here’s the only honest answer: So far, Nasdaq company earnings are up 46% year-over-year.

read more

Who's Right? The Stock Market or the Bond Market?

"As I see it, bonds look like they have further to fall, while stocks look tenuous at these levels," writes Peter Atwater, founder of Financial Insyghts.

read more

Poll of the Day: If You Could Have Lunch with One Fed Chair...

What do you think? Cast your vote. Let us know.

read more

Are Millennials Actually Lazy, Narcissists? An Interview with Neil Howe (Part 2)

An interview with Neil Howe on why Boomers and Xers get it all wrong.

read more

6 Charts: The French Election, Nasdaq All-Time Highs & An Earnings Scorecard

We've been telling investors for some time that global growth is picking up, get long stocks.

read more

Another French Revolution?

"Don't be complacent," writes Hedgeye Managing Director Neil Howe. "Tectonic shifts are underway in France. Is there the prospect of the new Sixth Republic? C'est vraiment possible."

read more

Cartoon of the Day: The Trend is Your Friend

"All of the key trending macro data suggests the U.S. economy is accelerating," Hedgeye CEO Keith McCullough says.

read more