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(Sharecast News) - The UK government announced a ban on disposable vapes overnight on Monday, as part of its efforts to combat the increasing trend of youth vaping and ensure children's wellbeing, sending shares in Chill Brands and Supreme southwards.
Recent data revealed that the number of children using vapes had tripled in the last three years, with 9% of 11 to 15-year-olds now using the products.
The government said disposable vapes played a pivotal role in driving youth vaping, with usage among 11 to 17-year-olds nearly nine times higher in the last two years.
To address the issue, it said it would introduce new measures to restrict child-targeted vape flavours and mandate plain, less appealing packaging.
The measures would also change how vapes are displayed in stores to reduce their visibility and attractiveness to children.
To combat underage sales, the government said it would impose fines on shops in England and Wales found selling vapes to children, in addition to existing fines.
Trading standards officers would have on-the-spot authority to tackle underage sales.
In addition to the disposable vape ban, the government said it would also prohibit children from using vaping alternatives, such as nicotine pouches.
It said £30m in annual funding would be allocated to help the Border Force, HM Revenue and Customs (HMRC) and Trading Standards in enforcing the new measures.
The announcement of the disposable vape ban was impacting shares in firms involved in making and distributing vape products, including Chill Brands and Supreme.
Chill Brands said its products, equipped with recharging ports, should not be classified as disposable, and asserted they should be unaffected by the ban.
Its share price was still plunging, however, suggesting investors were not in agreement with that assertion.
"Rishi Sunak made it perfectly clear last year that he will not tolerate the rise in young people taking up vaping so the ban on disposables seemed inevitable, following on from last year's plan to create a smoke-free generation," said Russ Mould, investment director at AJ Bell.
"Sales of vapes have grown in recent years, with numerous manufacturers and suppliers capitalising on the trend by offering more products in as many flavours and styles as you can imagine.
"Naturally, companies caught up in the government's clampdown face a sharp hit to earnings if there continue to be new measures to stamp out bad habits involving vaping among consumers."
Mould said "Chill Brands implied it was not affected by the latest announcement because recharging ports on its products meant they were not classified as disposable.
"The market seems to question this logic given the fierce share price sell-off.
"Effectively, investors are saying there is a major risk to earnings, whether it is from Sunak's latest announcement or the general direction of travel by the government to stop young people getting into the vaping habit."
At 0953 GMT, shares in Chill Brands Group were down 25.39% at 2.91p, while those in another vape specialise, Supreme, were off 66.7% at 98p.
Reporting by Josh White for Sharecast.com.
