British American Tobacco Navigates Regulatory Shifts with CBD Expansion and FDA Tailwind

British American Tobacco gains regulatory relief for vaping products and invests $75M in hemp CBD firm Charlotte's Web, reshaping its portfolio beyond cigarettes.

British American Tobacco is playing both sides of the nicotine and cannabis divide, scoring a major regulatory win in Washington while simultaneously deepening its bet on hemp-derived CBD. The London-based giant this week completed a transformative investment in Charlotte’s Web Holdings, the Colorado-based hemp extracts specialist, just as the US Food and Drug Administration signalled a softer stance on vaping and nicotine pouches that could unlock fresh growth for its Reynolds American subsidiary.

The dual moves underscore a broader corporate pivot: BAT is steadily reshaping its portfolio beyond traditional cigarettes, positioning itself in regulated health and wellness markets while also securing more favourable conditions for its next-generation tobacco products.

A $75 Million Debt-to-Equity Swap in Colorado

Through its subsidiary BT DE Investments Inc., BAT on 28 May 2026 closed a two-part transaction with Charlotte’s Web. First, it converted an outstanding C$75.3 million convertible note — plus C$14.2 million in accrued interest — into shares at C$0.94 each, for a total of roughly US$65 million. Alongside that, BAT injected an additional US$10 million via a private placement at the same price.

The conversion wiped out around US$65 million in long-term debt, leaving Charlotte’s Web debt-free. The company will use the fresh capital to cover operating costs and fund clinical development projects, including a planned entry into a US Medicare pilot programme for hemp-based CBD products. In exchange for its now 40% stake, BAT gains the right to appoint a second board member. Shareholders approved the necessary resolutions at the annual meeting on 28 May.

FDA Changes the Vape Calculus

Across the Atlantic, the regulatory mood has shifted in BAT’s favour. The FDA announced a new approach of “enforcement discretion” for certain e-cigarettes and nicotine pouches whose applications meet required standards — a marked departure from the earlier, stricter focus on pre-market authorisation. For established players like Reynolds American, the change reduces uncertainty around product availability.

Barclays analyst Pallav Mittal upgraded BAT to “Overweight”, citing the FDA pivot as a key growth catalyst. The reasoning is straightforward: less regulatory friction means greater predictability in the lucrative US market. The aromatised Vuse brand, in particular, could benefit if hurdles continue to ease. Health groups have denounced the relaxation, but for market leaders it creates a more stable environment.

Capital Returns Continue Apace

BAT is not relying solely on external catalysts. On 26 May, it repurchased 562,557 of its own shares from Merrill Lynch International, executed over the trading days from 18 to 22 May. The volume-weighted average price ranged between 4,936.63 pence and 4,857.38 pence per day. The shares will be cancelled, reducing the total outstanding to 2,168,097,856 and mechanically boosting earnings per share for remaining holders.

The buyback programme is part of a broader capital return strategy that has helped support the stock even amid volatility. In Frankfurt, BAT shares last changed hands at €53.76, down 2.61% on the day but still up 34.74% over the past twelve months. That leaves the stock just 6% below its 52-week high of €57.18, reached on 18 May — a level that now looks within touching distance as both the CBD bet and the FDA tailwind add momentum to the narrative.