- Johnson & Johnson will refile its bankruptcy claim.
- The company has been sued for allegedly causing cancer via its talc baby powder.
- JNJ stock pops 2.8% in premarket.
- Johnson & Johnson offer $8.9 billion to settle all claims.
Johnson & Johnson (JNJ) stock is up 2.8% at $163 in Wednesday's premarket after the healthcare giant said it would refile its earlier bankruptcy claim and offer claimants $8.9 billion to settle charges that its talc baby powder has caused episodes of cancer.
Johnson & Johnson stock news: $8.9 billion offer has favor of 60,000 claimants
As part of its announcement, Johnson & Johnson said it already had the backing of 60,000 claimants in the class-action lawsuit. Under the company's plan, the firm would pay out $8.9 billion over 25 years, allowing the length of the term to reduce its affect on current operations.
The company's LTL Management subsidiary also refiled its Chapter 11 bankruptcy claim, which was thrown out by the Third Circuit Court of Appeals in late January. LTL Management was created in order to hold all of Johnson & Johnson's talc-related liabilities. This legal innovation is referred to as the "Texas two-step", though many legal observers judge it to be illegal
"Resolving this matter through the proposed reorganization plan allows claimants to be compensated in a timely manner, and enables the company to remain focused on our commitment to profoundly and positively impact health for humanity," said Erik Haas, J&J Worldwide Vice President of Litigation.
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Johnson & Johnson originally offered $2 billion last October but could not come to an agreement with litigants and as recently as March said it would appeal to the Supreme Court in order to go ahead with the subsidiary's bankruptcy. A bankruptcy would greatly hurt claimants chances of collecting a large payout, which is likely why it is being announced in tandem with the $8.9 billion offer.
Johnson & Johnson was quick to say that the payout on the table did not mean the company was guilty of the cancer charges. Though it claims to stand by its talc-based product, the company has discontinued the line and said it would start using cornstarch instead of talc in its baby powder.
Johnson & Johnson stock forecast
JNJ stock's premarket climb to $163 makes sense since the R3 resistance level sits just higher at $163.60. Bulls are of course hoping that the end of litigation allows the stock to climb back to $180, but first they will have to deal with the early February range high at $166. Friday, Monday and Tuesday's daily candles gives JNJ the beloved and bullish Three White Soldier's trading pattern. This is typically a strong reversal signal, meaning that the market will now expect a continued rally. Maybe $180 is back on the horizon.
JNJ daily chart
