Supreme (SUP) joined Aim in February 2021 by placing shares with institutions at 134p each. Since then, profits have substantially increased, but after an initial rise, the share price has fallen back to near its issue price. The financials seem sound, so what’s the problem?
Supreme develops and manufactures products, and also distributes a variety of brands both directly to consumers and through its retail networks. It supplies batteries, lighting, sports nutrition, wellness and branded household consumer goods, but its main business is vapes, which now generate almost two-thirds of its gross profits. The group claims to be the “largest producer of e-liquids by volume in the UK”, with more than 250,000 bottles in over 60 flavours produced every working day, and it also distributes brands such as the market-leading ElfBar and Lost Mary disposable vapes.
The argument in favour of vapes is that they help smokers to quit, but the nicotine content in some can hook people as well. Supreme distributes vapes in brightly coloured packaging with sweet and fruity flavours such as “blue razz lemonade”, “rainbow blast” and “watermelon bg (bubblegum)” that could appeal to children. In January this year, the government said that the proportion of 11-to-17-year-olds using disposable vapes had risen ninefold over the past two years. It’s too early to know the long-term impact on the development of young lungs, hearts and brains; a small but increasing number have already been admitted to hospital with vaping-related disorders.