Bayer Shares Pump-n-Dump On Rumor & Denial Of $8 Billion Roundup Settlement

Bayer shares soared 11% on Friday on reports that Bayer had proposed to pay up to $8 billion to settle more than 18,000 US lawsuits alleging that Roundup - which it inherited during its acquisition of Monsanto - causes cancer. However, Bayer shares soared as much as 11% on the news, though they quickly shed most of their gains after Bayer denied reports of the settlement.

Bayer acquired Roundup and other glyphosate-based weedkillers as part of its $63 billion takeover of Monsanto last year. At one point, they were the best performing shares on the DAX.

Bayer shares had lost more than one-third of their value, or roughly 30 billion euros ($34 billion), since last August when a California jury found that Monsanto should have warned customers about the alleged cancer risks from Roundup.

Plenty of legal risk remains for Bayer. The company said this week that the next US. glyphosate lawsuit scheduled to be heard in St. Louis, Missouri, would likely be postponed and the company added on Friday that the following St. Louis case slated for September had been postponed to allow for settlement talks.

Bayer’s Chief Executive Werner Baumann last week said the company would consider settling with US plaintiffs only on reasonable terms, and if it "achieves finality of the overall litigation."

He added at the time the group was "constructively engaging" in a court-ordered process with mediator Ken Feinberg on the cases heard in federal court. Most of the pending cases, however, have been filed with US state courts.

The company, which says regulators and extensive research have found glyphosate to be safe, has previously said it was banking on US appeals courts to reverse or tone down three initial court rulings that have so far awarded tens of millions of dollars to each plaintiff.

According to Bayer, the company is currently trying to settle all of the lawsuits that have been filed. Bayer has indicated it could pay $6 to $8 billion, while plaintiffs’ lawyers want more than $10 billion to drop their claims.

"Progress on settlement is a clear positive to potentially remove what has been the key overhang in shares for a year," Bank of America analysts said in note.

An estimate of a $20 billion hit from the litigation has previously been reflected in the share price, while a likely litigation settlement liability was in the mid single-digit billion dollar range, they added.

But BofA kept a neutral rating on the stock, citing uncertainty over Bayer’s fortunes in the appeals process, with the first appeals verdict expected by the end of the year, and whether a settlement could be achieved before that.

Though as more potential plaintiffs emerge blaming glyphosate for their cancer, it's difficult to say how much longer this will go on for.