About 15 minutes before today’s close, DOJ filed a lawsuit against $WBA for “dispensing millions of unlawful prescriptions” in violation of the Controlled Substance Act.  After the market close WBA lost about 8%, or roughly $726M in market cap, even as Walgreens said in response to the DOJ suit that it will ask the court to “clarify the responsibilities of pharmacists and to protect against the government’s attempt to enforce arbitrary “rules” that do not appear in any law or regulation and never went through any official rulemaking process.”  Further, Walgreens says it “will not stand by and allow the government to put our pharmacists in a no-win situation, trying to comply with rules that do not exist.”

First, it’s important to note the timing of this lawsuit, filed three days before President Biden vacates the Oval Office, and with him goes his Attorney General and head of DOJ Merrick Garland. The new Attorney General and DOJ head will be Pam Bondi, who likely has no appetite for this type claim and will likely dismiss it once she is confirmed. 

Second, DOJ and Walgreens settled a very similar claim for “dispensing unlawful prescriptions” in 2013 for $80M.  Assuming a similar size settlement, and 864M fully diluted shares, the cost of settling this could be a one-time $.10/share - vs the almost $1/share lost by $WBA stock after hours.  

We can’t see why $WBA should have lost $726 million in market cap after this claim was filed, but it seems like a good opportunity to buy $WBA on the cheap.