Bayer Shares Drop 9% as Roundup Settlement Reality Sets In

Bayer AG shares (ETR: BAYN) tumbled 9.04% today, erasing yesterday's rally and then some, as markets digested the full financial implications of the German pharmaceutical giant's proposed $7.25 billion settlement over its controversial Roundup herbicide. The stock now trades around €45, well below the €49.78 high reached when settlement rumours first surfaced.

The sharp reversal underscores the precarious position Bayer finds itself in as it attempts to draw a line under one of the most costly corporate litigations in recent history. While the settlement represents a strategic milestone in resolving thousands of current and future lawsuits alleging that Roundup exposure caused non-Hodgkin lymphoma, the financial burden appears to have spooked markets more than the prospect of legal closure has comforted them.

Monsanto, the agricultural giant Bayer acquired for approximately $63 billion in 2018, will make capped, declining annual payments over up to 21 years under the proposed class action settlement filed in the Circuit Court of St. Louis, Missouri. The structure is designed to provide Bayer with greater cost certainty and control over litigation expenses, spreading the financial impact across two decades rather than forcing immediate lump-sum payments.

The settlement forms part of what Bayer describes as a multidimensional strategy to contain Roundup-related litigation risks. This includes a parallel effort seeking U.S. Supreme Court review of the Durnell case, which the company views as a complementary avenue toward achieving regulatory clarity and reducing future exposure. Together, these initiatives represent Bayer's most comprehensive attempt yet to manage the litigation fallout from its Monsanto acquisition.

The financial toll is substantial. Subject to final audit, Bayer's litigation provisions and liabilities will surge from €7.8 billion as of September 30, 2025, to €11.8 billion. Within that total, glyphosate-related provisions specifically will climb from €6.5 billion to €9.6 billion. The company anticipates litigation-related cash outflows of approximately €5 billion in 2026 alone, which is expected to push free cash flow into negative territory for the year.

To manage these obligations, Bayer has secured an $8 billion bank loan facility, adding to its already considerable debt burden inherited from the Monsanto acquisition. The financial strain has prompted management to delay publication of its full-year 2025 results and 2026 guidance until March 4, as accountants work to reflect the settlement agreements in the company's financial statements.

Markets appear to be grappling with the tension between litigation certainty and financial reality. While resolving the Roundup litigation removes a significant overhang that has plagued Bayer since shortly after the Monsanto deal closed, the price tag reinforces concerns about whether the acquisition will ever deliver the value management promised. The stock remains well below the levels seen before the first major Roundup verdict in 2018, which awarded substantial damages to a California groundskeeper.

The settlement still requires court approval, introducing an element of execution risk. Additionally, Bayer has reached separate confidential agreements to resolve certain other Roundup cases, the terms of which remain undisclosed.