FRANKFURT, Feb 18 (Reuters) – Bayer shares fell as much as 9.2% on Wednesday, erasing gains from the previous day, as investors questioned whether a proposed $7.25 billion settlement of lawsuits related to the herbicide Roundup would represent a decisive turnaround.
The German pharmaceutical and crop protection group announced Tuesday night that it had reached an agreement to resolve tens of thousands of current and future product liability claims, after years of battling legal risks related to Roundup, acquired in its 2018 purchase of Monsanto.
The 7.3% rise in shares on Tuesday was more than reversed by a drop of more than 8% at around 10:45 am (Brasília time).
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Analysts at JPMorgan said the deal was in the right direction, but noted that Bayer did not disclose how many plaintiffs must join the deal for it to proceed, and it was also unclear how willing they would be to accept the offer.
‘There are still considerations to be made, such as the need for court approval and the possibility of a high refusal rate,’ they said.
Late on Tuesday, Markus Manns, portfolio manager at Union Investment, also warned that the proposal was ‘not yet the breakthrough that many investors were hoping for.’
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Both JPMorgan and Manns said that much still depends on a pending ruling from the U.S. Supreme Court on the overall merits of the lawsuits.
Bayer asked the court to invalidate the complaints, which are primarily based on state law, arguing that federal regulation in its favor should take priority.
Stephan Wulf, an analyst at broker Oddo BHF, warned that a series of legal hurdles must be overcome for the deal to come into force, and that the Supreme Court’s opinion would be an additional uncertainty.
“That’s not decided yet,” he said.
A Bayer spokesman said the group would not speculate about its chances of success at the Supreme Court, but forwarded to Reuters a legal opinion from the U.S. attorney general in December that showed President Donald Trump’s administration agrees with Bayer’s interpretation of the law in question.
