Reckitt Benckiser stock sinks on $60M baby formula verdict
Reckitt Benckiser Group (RBGLY) shares are taking a noticeable hit after an Illinois jury awarded a mother $60 million in a lawsuit, where she argued one of the British consumer goods company's baby formula brands led to the death of her baby.
Yahoo Finance Live reports on Reckitt's declining stock and the broader implications this news is having on Abbott Laboratories (ABT), who also produces baby formula products.
For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.
Editor's note: This article was written by Luke Carberry Mogan.
Video Transcript
JOSH LIPTON: Reckitt Benckiser, we need to chat this move possible implications. So a jury in Illinois has awarded a woman $60 million in damages, saying its baby formula did lead to the death of her premature baby that specifically the label didn't warn of risks of a disease called NEC in its formula.
Now Reckitt is responding, we should note that disagrees with this verdict emphasize that its product is safe that it will appeal. But this clearly as you can see, they're really spooked investors and we saw knock on effects in other names too Julie like Abbott which of course, also makes infant formula.
JULIE HYMAN: Exactly. And the reason that we are seeing not just Reckitt down as much as it is. Those are the US listed shares. It's a UK based company. But in Abbott as well is that now analysts are saying, could we see a broader regulatory push on this very issue here. I saw one quote here from Hargreaves Lansdown saying based on the size of this fine, it suggests investors, which it's only $60 million fine.
So it's not large given the size of these companies. But what the share action suggests is that investors do expect there is perhaps more to come on this front here and maybe I don't know if it's too late for these companies to get out ahead of it and put some sort of warning on the label for premature infants.
It's unclear exactly what's going to happen in this case. But Mead Johnson is the company that Reckitt Benckiser owns in the US that sells this formula.
JOSH LIPTON: And we should note Abbott did tell Bloomberg in a statement that any allegations that its products are for premature babies are unsafe are without merit. I don't know if we should note that.
