22nd Century Group has received its long-awaited membership in the consortium of tobacco manufacturers that are part of a 1998 settlement with attorneys general in 46 states, clearing the way for it to begin producing its own cigarettes.
With the final states signing off on 22nd Century becoming part of the master settlement agreement, the Clarence company said it will ramp up production of its super-premium priced Red Sun and Magic brands at the factory that it bought and equipped in North Carolina.
22nd Century executives had been waiting for the company to become a member in the settlement group before launching production of its cigarettes. The MSA sets restrictions on tobacco marketing and requires members to contribute a portion of their sales to the participating states. About 97 percent of the cigarette sales are covered by the settlement agreement.
“Many doubted we would succeed in becoming a member of the MSA,” said Henry Sicignano III, 22nd Century’s president. “We are proud of the achievement.”
The slow pace of the company’s efforts to become part of the tobacco settlement, which 22nd Century executives believe will make it less complicated to produce its cigarettes, had been criticized late last month by GeoInvesting, a short-seller that published a long, and highly critical article online. GeoInvesting stands to profit if 22nd Century’s stock goes down in price.
Since the article appeared, 22nd Century also has announced that it has signed a deal to produce private-label cigarettes for an 800-store tobacco products chain, Smoker Friendly International. Production of those cigarettes is expected to begin at the beginning of next year. Sicignano said he expects the hundreds of Smoker Friendly stores to also carry 22nd Century’s own brands of cigarettes.
That deal, as well as the start-up of production of its own cigarettes, will help produce a sustainable source of revenue for the company, said Joseph Pandolfino, 22nd Century’s chief executive officer.
22nd Century’s stock, which plunged by 15 percent last Wednesday after GeoInvesting posted its article, has regained most of its value since then. The share price fell 16 cents, or 5.57 percent, to $2.71. That is 11 percent below its closing price of $3.05 before the short-seller’s article appeared.