It’s been a legal rollercoaster ride for Kaival Brands (NASDAQ:KAVL) lately. Earlier, the U.S. Food and Drug Administration (FDA) rejected Premarket Tobacco Product Applications for the non-tobacco flavored BIDI Sticks, of which Kaival Brands is the exclusive U.S. distributor. However, today it was announced that an appeals court overturned the FDA’s ruling. Consequently, KAVL stock pushed 20% higher this morning.
To provide some background info, the BIDI Stick is a self-contained electronic nicotine delivery system. It’s manufactured by a company called Bidi Vapor. Moreover, the BIDI Stick is “a UL-certified battery and technology designed to deliver a consistent vaping experience for adult smokers 21 and over.”
There’s a lot at stake here for Kaival Brands, as it’s the sole distributor of BIDI Sticks in the U.S. In a time when vaping is controversial due to perceived health risks, the FDA’s denial of Bidi Vapor’s Premarket Tobacco Product Applications for the non-tobacco flavored BIDI Sticks is highly problematic for Kaival Brands.
Yet, the FDA’s rejection isn’t the end of this story. In a two-to-one ruling, the U.S. Court of Appeals for the 11th Circuit decided in Bidi Vapor’s favor. With that, the court effectively overturned the FDA’s denial of Bidi Vapor’s product application.
What’s Happening With KAVL Stock?
Upon learning of this development, traders sent KAVL stock 20% higher and even 30% higher at one point. It’s now possible for the shares to reclaim the longstanding $2 resistance level.
Interestingly, the appeals court even went so far as to call the FDA’s decision “arbitrary and capricious.” Apparently, the FDA “failed to consider” Bidi Vapor’s “relevant marketing and sales-access-restrictions plans” in regard to the BIDI Sticks.
In other words, Bidi Vapor is aware of the potential issues surrounding vaping and is working to address them. Kaival Brands President and COO Eric Mosser explained:
“[T]he appeal to and illegal usage by youth can be significantly reduced […] with responsible marketing, adult-oriented packaging, restrictive online access, and enforcement of the current laws and regulations to force out bad actors marketing illegal and counterfeit products.”
So now, the ball is back in the FDA’s court, and KAVL stock holders are enjoying a boost of confidence.
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On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.