Shares of 3M (MMM-US) plunged nearly 10% on Friday (26th) after an unfavorable ruling in the military earplugs case, the biggest one-day drop in more than three years.
The Wall Street Journal reported Friday that Indianapolis Bankruptcy Court Judge Jeffrey Graham dismissed 3M’s claim, preventing 3M from transferring legal responsibility for the Combat Arms earbud lawsuit to bankruptcy court.
3M shares tumbled $13.62, or 9.54%, to close at $129.14 a share on Friday, their biggest drop since April 25, 2019, when the stock fell 12.95%. 3M did not immediately respond to a request for comment on the ruling.
Filing the bankruptcy of the subsidiary was one of 3M’s litigation tactics in the case. 3M said on a conference call to report second-quarter earnings in late July that it plans to file for bankruptcy protection for its Aearo Technologies subsidiary, which is involved in a lawsuit over poorly designed Combat Arms earbuds, and set up a $1 billion trust fund to handle about 230,000 cases. Pending earplug defect lawsuit.
3M announced its second-quarter earnings report last month and lowered its full-year outlook forecast, but the stock price still rose 5%. The biggest driving force came from the above-mentioned litigation strategy. After filing for bankruptcy protection, it is expected to terminate the litigation process.
Citi research analyst Andrew Kaplowitz said at the time that it would be a long-term positive for 3M to limit its Combat Arms earbud lawsuit to $1 billion by filing for bankruptcy.
Hundreds of thousands of military personnel sued 3M for its faulty earplugs, which damaged users’ hearing, and huge legal liability, which has weighed on 3M’s stock price for months.
3M is down about 27.3% so far this year, compared with the S&P 500’s average loss of about 10% over the same period. 3M shares peaked at nearly $260 a share in March 2018.
Wall Street has been worried about 3M’s lawsuit compensation for a while now, and only one analyst covering the stock has a “buy” rating, or a 5% buy rating ratio, compared to about 58% buy on the S&P 500 The rating ratios are far from one another.