3M hits 2-1/2-year low as firm appeals ruling on earplugs

wellesenterprises/iStock Editorial via Getty Images

3M (NYSE:MMM) hit a 2-1/2-year low even as it appealed a recent bankruptcy court ruling. The price slipped as much as 3% to $125.27 a share before partly rebounding during Monday’s session.

The company on Monday filed a notice to appeal a judge’s decision that denied an effort to halt more than 230,000 lawsuits claiming its earplugs were faulty, Bloomberg Law reported.

U.S. Bankruptcy Judge Jeffrey Graham on Friday ruled against a temporary stay of suits that accuse 3M and a bankrupt subsidiary, Aearo Technologies, of selling defective combat earplugs.

3M has denied that the earplugs are unsafe as it faces the possibility of defending itself in thousands of trials throughout the country. The legal fight could cost 3M as much as $100 billion and push the manufacturer into bankruptcy, an expert witness hired by plaintiff lawyers testified this month.

Evaluating litigation costs

3M’s market value declined by about $8 billion on Friday, including a drop after the bankruptcy court issued its decision. That decrease may indicate how much investors estimate the company will have to pay to resolve the earplug litigation in multiple court districts, Nicholas Heymann, an analyst at William Blair, said in a research note on Monday.

"If the market's estimate of $8 billion is accurate, this could suggest average compensation of more than $34,000 for the 235,000 pending plaintiffs," the report said.

Seeking Alpha contributor The Value Investor has a Hold rating on 3M (MMM), citing multiple challenges the company faces. Contributor Another Mountain's Rock Investing rates 3M (MMM) as a Sell because of several uncertainties.