One theory behind an approach by British American Tobacco to snap up all of Reynolds American is that doing so would give BAT access to Reynolds’ presence in the US e-cigarette market — the largest in the world. After years of declining growth in developed markets as smokers kicked their habit, it is those markets that now have the largest share of the new technology.
A tantalising prospect indeed, from a sales perspective.
Of course, buying Reynolds will come warts and all, including the firm’s dependence on conventional cigarette sales. But companies like BAT have also bought firms that only produce e-cigarettes, such as Poland’s Chic last year. And they have been developing their own vaping products.
If the scientific research is correct and e-cigarettes are much less harmful than tobacco — and are a more successful way of giving up smoking than other methods — then surely there is a social benefit to growing their popularity?
Much like an energy firm can sell a green bond where proceeds go to a renewable energy product (on a ‘best efforts’ approach, of course), what should stop a tobacco firm marketing a social bond — or vape bond — where the cash raised goes into e-cigarette development?
Impact reporting is becoming more and more important to green bonds. That’d be easy to replicate in a vape bond — simply conduct surveys to find by how much consumers cut their consumption of conventional, "brown" cigarettes once they’ve tried the electronic option.
Or, to molecularly tweak a green bond theme, the study could quantify carbon monoxide reduction.
There could be one stumbling block to our vape bond proposal, however.
One of the main attractions of green bonds, according to their cheerleaders, is that they offer investor diversification and can attract buyers that would not normally purchase an issuer’s debt.
But given that in September BAT took orders of £1.5bn for a £650m 36 year issue — then sold a $650m three year deal a day later — it doesn’t seem that the big tobacco companies are struggling to attract investors. Even in the plainest of packaging, the issues sell themselves.
Nor does it seem that the buy-side is overly concerned about the social impact of those firms’ primary business, or that it will be struggling for cash anytime soon.
For the moment, vape bonds — like the symptoms e-cigarettes reportedly reduce — will remain a bit of a wheeze.